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Former Fidelity Magellan Fund manager Peter Lynch used to tell investors to "buy what you know."
It's good advice.
Granted, you may not be able to do that with every investment you make.
But if you look for as many opportunities as possible to employ this philosophy, chances are you'll end up adding some real muscle to your portfolio.
Here's why I was thinking about Lynch, who shared his investing philosophies with millions of individual investors in such runaway best-sellers as One Up on Wall Street…
This Great Profit Opportunity Was a Minute Away
I was thinking about this late one night earlier this week when I was working on one of my little "projects" at home. The house was very still. My son Joey and wife Robin were in their beds up the hall – sound asleep – and our border collie Sterling was sprawled nearby… sort of half-awake.
My pocket knife – one of those nice little jobs with a spring-assist opening – had lost some of that "spring." My plan was to clean it up and lubricate the spring action to cut down the friction.
I first thought about using silicon spray.
But then I knew the answer was WD-40.
For a lifelong "motorhead" like me, WD-40 is the mechanical version of a miracle "cure-all"… and can help fix just about anything. It kind of reminds me of the Gus Portokalos character (played by Michael Constantine) in "My Big Fat Greek Wedding," who believed that Windex could fix anything – including sore joints.
Anyway, I shot some WD-40 inside my knife and "worked" the action back and forth a few times, and my spring-assist pocket knife has a new lease on life.
WD-40 is a great product. It's a great brand. And we believe it can be a great investment – especially for long-term investors looking to navigate a market as squirrely as this one.
Heck, there's even a WD-40 Fan Club.
In short, it's a stock that you should look to buy and keep for a long time.
The One Cult You'd Join
The San Diego-based WD-40 Co. (Nasdaq: WDFC) is a $1 billion market value company whose motto is: "We live under the sink, in the garage, and in the toolboxes of the world." (True to form, I found the can of WD-40 spray I used under our kitchen sink.)
It does business in 188 countries around the world and, in the fiscal year ended in August 2013, had $368.55 million in sales and $38.9 million in profit – a decent profit margin of 11%.
WD-40 goes all the way back to 1953, when a staff of three in a small lab at a fledgling firm called Rocket Chemical Co. set out to create a line of rust-prevention solvents and degreasers for the aerospace industry.
It took researchers 40 tries to get the water-displacing formula worked out.
But it was a powerful discovery: The original secret formula for WD-40 – which stands for "Water Displacement perfected on the 40th try" – is still in use today.
Convair, an aerospace contractor, first used WD-40 to protect the outer skin of the Atlas missile from rust and corrosion. The product was so effective that some Convair workers sneaked cans of WD-40 out of the plant to use at home.
Rocket Chemical founder Norm Larsen decided to put WD-40 in aerosol cans, correctly guessing that consumers might also find home uses for the lubricant. The product showed up on San Diego store shelves in 1958.
WD-40 was still Rocket Chemical's only product 11 years later, when the name was changed to the WD-40 Co. It went public in 1973, and its shares soared 61% on their debut.
When the company celebrated its 40th anniversary in 1993, WD-40 also broke the $100-million-in-revenue mark. Sales exceeded a million cans a week.
A survey found that WD-40 – at the time still the company's only product – was used by 81% of professionals at work.
Even more dramatic: The product was present in four of every five U.S. households.
In other words, 80% of America owned this product.
And that was 21 years ago, when this country had a population of 257 million folks.
Today we're talking about 320 million.
That doesn't include all the economic growth we've seen in many of the 187 other countries WD-40 sells to.
Those statistics underscore the thing I most like about this company: It makes a "cult" product. There are thousands of known uses for WD-40, most of which are pretty well known: silencing squeaky hinges, protecting tools and parts from rust, lubricating joints, and even removing road tar from a car's paint job.
But there are also some truly zany stories, which is why this is a "cult" product…
About the Author
Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning. With his latest project, Private Briefing, Bill takes you "behind the scenes" of his established investment news website for a closer look at the action. Members get all the expert analysis and exclusive scoops he can't publish... and some of the most valuable picks that turn up in Bill's closed-door sessions with editors and experts.
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