Why Warren Buffett Would Love Garmin

3 min read
This highly profitable consumer-facing company has the cash flow and strong market position that Buffett loves from his operating businesses.
Warren Buffett's Berkshire Hathaway is unique in many ways. Buffett has built the conglomerate with cash-generating companies that can succeed over the long term thanks to wide moats in their businesses -- and he seeks out more businesses like that in his investment portfolio.

If you're looking for investments that fit the mold yourself, one company that generates enormous cash flow, has a debt-free balance sheet, and pays a nice dividend is Garmin (NASDAQ:GRMN), a maker of outdoor recreation devices. Garmin's initial success was with personal navigation devices (PNDs), when GPS systems first became popular. But the company has shown that with advancing technologies, it can stay ahead of consumer demand for new GPS devices.

The business is thriving

Garmin isn't just a stodgy old income-generating cash cow. Like most consumer retail businesses, its growth took a pause earlier this year due to impacts from the pandemic, but it has bounced back quickly. The company's products have gained popularity with boaters, pilots, hunters, and outdoor exercise enthusiasts.

Its four growth segments -- fitness, outdoor, marine, and aviation -- make up almost 90% of total net sales. Many people still think of the old automotive GPS devices when they hear the name Garmin, but that segment has become less and less relevant as the others prosper. Year-over-year sales growth of the major segments in 2019 broke down this way:

Fitness, 22%

Outdoor, 13%

Howard Smith
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