Money
& Investing 
To Check on the Fitness of a Stock,
“Kick the Tires, See the Tie and Visit the Site”
As an investor, have you ever gone out and “kicked the tires”?
That’s a Wall Street saying for the process of studying a company’s product or service. You would be surprised to see how much you can pick up first-hand or, in some cases, second-hand, by speaking with a well-informed friend about a company’s products.
There is another Street expression: “Let’s go and see the color of their tie.” That means to go and size up the personality of the management of a company.
Not everyone can meet the top officers of a company. However, today’s Internet services do give you a chance to listen to company conference calls. The sound and tone of a person’s voice, his or her appearance and other factors can sometimes tell you a lot about the person and how he or she probably runs the firm.
I would add a third expression: “Check the site.” To do that, one would check out the quality and information on a company’s website. The growth of the Internet in the past 10 years has been phenomenal and a big help to investors. Make it a point to go to the website of a company whose stock interests you.
What you want to see is an attractive website that draws your interest, provides good information and, of course, posts the latest financial information on the company. It is also good to see a list of Wall Street analysts who follow the company and, if possible, links to their reports.
If you come across a stock you like and then check the website, and it looks dull and not very informative, be careful. In the old days, a company’s face was its annual report. Today, it is its website.
So, if you find an interesting stock, you may want to buy, but make sure its price is in a good up trend and the earnings outlook is promising. Then, try to check out the:
- Product or service
- Management
- Company website
Sometimes, one of the three items on this check list could be the initial clue that leads you to a good stock.
I live in the Phoenix area, and I happened to see a giant building going up. I thought it was an office or government building. To my surprise, I was told it was a fitness center. Wow! a fitness center. I never saw such a big building for a fitness center. What gives?
I got an opportunity to go into the center, which was recently built in Gilbert, AZ. It was run by a company called Life Time Fitness Inc. (LTM) based in Eden Prairie, MN. The company’s stock (LTM) became public in 2004 at 20. It is now 54 and still trending higher.
I went in to “kick the tires”. The Life Time facility was very attractive, modern and clean and, most of all, very busy. They had the usual array of workout machines and equipment. I tried a few machines -- and two in-door basketball courts to take a few shots -- and two swimming pools -- didn’t have time for a dive. I was impressed.
I didn’t get a chance to meet management first-hand. However, I did get reports on them when they opened a facility in Scottsdale, AZ. The word was, they were very exact in all they did.
A trip to the Life Time website showed the same “exactness”. The site at www.lifetimefitness.com featured very good information, especially for investors. LTM’s chairman Bahram Akradi even has a code of business conduct and ethics. He also outlines precisely the firm’s mission and vision.
Membership dues at Life Time range from 50 to 60 dollars a month for individuals and 90 to 130 dollars for families. LTM opened its first fitness site in 1992. It now has 64 facilities. The predominate areas: 23 in Minnesota, 11 in Texas and 8 in Illinois. Annual revenues are running at 511 million dollars.
This year, analysts forecast LTM’s profits will climb 29 percent to 1.75 a share from 1.36 a share a year ago. The stock sells with a price-earnings ratio of 30, based on this year’s projected net. Next year, The Street predicts net will rise 24 percent to 2.17 a share.
Technically, the stock is at 54 and in a seven-week basing pattern (as of mid-July). It just needs to get over 55 to break out and hit a new high (see following chart). The stock is one of the best performing IPOs of the past few years.
Mr. Fasciocco’s articles appear at www.tickertapedigest.com. He is a contributing writer for several national publications. He is also president of Corona Investment Management.
Mr. Fasciocco can be reached at leo2@tickertapedigest.com
