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James Li
James Li
Articles (1222)  | Author's Website |

3 Stalwarts to Consider Among Manufacturing Companies

Commerce Secretary Wilbur Ross says US manufacturing might increase given coronavirus outbreak in China

January 30, 2020 | About:

Given the accelerating spread of the China coronavirus around the globe, three Peter Lynch Stalwart stocks within the manufacturing sector are Gildan Activewear Inc. (NYSE:GIL), Nike Inc. (NYSE:NKE) and Steven Madden Ltd. (NASDAQ:SHOO) according to the All-in-One Screener, a popular GuruFocus Premium feature.

Dow recovers early loss as WHO says coronavirus situation is under control

On Thursday, the Dow Jones Industrial Average closed at 28,858.53, up 124.08 points from Wednesday’s close of 28,734.45 and 325.15 points from the intraday low of 28,533.38. While the stock markets tumbled during the morning on fears that the China coronavirus outbreak could curb global economic growth, such fears dissipated when the World Health Organization said that China had the outbreak under control and thus did not recommend travel restrictions to the infected country.

The Commerce Department said in the morning that the U.S. gross domestic product increased just 2.1% during the fourth quarter of 2019 and 2.3% for the year, the slowest annual growth over the past three years.


The National Health Commission of China reported 7,711 confirmed cases of the coronavirus, including 170 casualties. According to CNBC, Sevens Report founder Tom Essaye said that global markets are “becoming more concerned” about future earnings and economic growth as companies “implement work stoppages” to mitigate the spread of the disease.

Fears worsened as the U.S. Centers for Disease Control and Prevention confirmed in a press release the nation’s first person-to-person transmission of the coronavirus and warned that further cases might be reported in the coming days, including more person-to-person spread.

U.S. Commerce secretary sees potential in domestic manufacturing as coronavirus spreads in China

The WHO’s latest comments quelled early fears of the coronavirus impacting global growth. Despite this, U.S. Commerce Secretary Wilbur Ross (Trades, Portfolio) said in a morning Fox Business Network interview that the coronavirus outbreak gives businesses “another thing to consider” as they review their supply chain operations. Ross further added that the virus might help “accelerate the return of jobs” to North America, including the U.S. and Mexico.

As such, investors might find good opportunities in the manufacturing sector as the increase in jobs might boost revenue and earnings. Peter Lynch defines a stalwart as a well-established company that still offers good growth potential. The GuruFocus All-in-one Screener applies several criteria using Lynch’s stalwart definition, including good business predictability, a 10-year median return on capital of at least 14%, 10 years of profitability over the past decade and a 10-year revenue growth rate of between 8% and 20%.


Gildan manufactures a wide range of apparel items, including T-shirts, fleece, socks and underwear. GuruFocus ranks the Montreal, Quebec-based company’s profitability 9 out of 10 on several positive investing signs, which include a five-star business predictability rank and operating margins that are outperforming 88.60% of global competitors.


The company’s valuation ranks 7 out of 10: Gildan’s price-to-free-cash-flow and price-earnings-to-growth ratios are near 10-year lows even though valuation ratios are underperforming over 60% of global competitors.


Gurus with large holdings in Gildan include Sarah Ketterer (Trades, Portfolio) and PRIMECAP Management (Trades, Portfolio).



Nike designs and wholesales athletic footwear and apparel in 170 countries around the world. The Beaverton, Oregon-based sports giant operates over 1,200 retail stores, including over 400 stores in the U.S.


Nike said revenues for the six months ending November 2019 increased approximately 11% from the prior-year period, driven by strong growth in Greater China and Europe, the Middle East and Africa. The strong revenue growth contributed to a three-year revenue growth rate of approximately 9.2%, outperforming 72.56% of global competitors. Positive investing signs, which include a five-star business predictability rank and profit margins that outperform over 85% of global apparel manufacturers, contribute to a GuruFocus profitability rank of 9 out of 10.


Gurus riding Nike’s strong profitability include Spiros Segalas (Trades, Portfolio) and Pioneer Investments (Trades, Portfolio). Segalas added 68,673 shares during the fourth quarter, with shares averaging $87.72.


Steven Madden

Steven Madden designs and sells brand-name and private-label footwear, handbags and accessories. GuruFocus ranks the Long Island City, New York-based company’s profitability 8 out of 10 on several positive investing signs, which include consistent revenue growth and a Joel Greenblatt (Trades, Portfolio) return on capital that outperforms over 96% of global competitors. Additionally, operating margins are outperforming 79.41% of global manufacturing companies despite contracting approximately 6.5% per year on average over the past five years.


Gurus with holdings in Steven Madden include Philippe Laffont (Trades, Portfolio) and Chuck Royce (Trades, Portfolio).


Disclosure: No positions.

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About the author:

James Li
I am an editorial researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

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