Return of the Cocoon


We are in the business of spotting trends, the ultimate way to enhance wealth. A recent Gary Scott message showed how terrorism and the pressures of adaptation have brought cocooning back with a vengeance. We looked at how this created a trend for top of the line appliances and have been looking for international investments and an international business that could cash in on this trend. Finally we have found an international company that can really profit from cocooning. This November 15, 2004 Gary Scott message reviews that company, and their international shares.

You can read the original cocooning message for background at http://www.garyascott.com/archives/2004/10/18/1099/index.html

To date we identified the following companies that manufacture products which could benefit from this trend.

Sub-Zero-Wolf (800-222-7820) www.subzero.com
Wolfrange (888-639-9653) www.wolfrange.com

We like the look, feel and products of this business and have a Wolf range ourselves but this is a family owned firm so we do not see a way to invest.

Viking is another great looker but is also a privately held firm.

Viking Viking (888-845-4641) www.vikingrange.com

Dacor is a California firm also privately owned by employees. www.dacor.com

Bosche is heavily involved in this realm. They manufacture their own top of the line appliances and own BSH Home Appliances Corporation which manufactures Gaggenau and Thermador (800-656-9226) www.thermador.com.

I have asked readers for comments and thoughts and received only one from reader Craig McCarty who wrote:

Gary,

We just replaced our KitchenAid dishwasher with a Bosch. The very experienced appliance salesman in Berkeley said Bosch is "absolutely killing" KitchenAid, Miele, etc. because Bosch is combining European design/engineering with cheaper labor in their South Carolina factory. As a result, Bosch is applying the lessons learned by BMW, etc. and applying them to the North American appliance market.

Regards, Craig"

But Bosche is a private foundation that is affiliated with the gigantic German firm Siemens. I doubt that an uptrend in their small appliances business would rocket Siemen shares up.

Asko (800-898-1879 or www.askousa.com) is another international corporation and has a full line of high-performance washers, dryers and dishwashers. ASKO claims that their appliances do a better job of cleaning with a fraction of the water, electricity and detergent of ordinary machines. Every component is constructed of steel rather than plastic wherever possible. And they say that every ASKO product is still built with Scandinavian quality and environmental sensitivity Ñ just as their founder Karl-Erik Andersson intended.

So this business has something going for it, top quality, and environmental benefits, etc. The company claims that ASKO appliances are some of the best-performing, most ecology-friendly, and longest lasting on earth.

But I have not pinned down an investment yet. Asko is a name used by AM Appliances of Richardson Texas which is in turn a division of

the Antonio Merloni Group which is EuropeÕs fifth largest appliance manufacture. WeÕll continue to look at this plus three other brands:

Garlands (800-551-8633) www.dean.welbilt.com

Fisher Paykel (888-936-7872) www.fisherpaykel.com

Miele (800-463-0260) www.mieleusa.com

If you know anything about any of these, please let me have your thoughts.

Here is the one firm we have found that may have some possibilities. Aga. A message about a unique benefit this firm has was written earlier this year at http://www.garyascott.com/archives/2004/04/26/1037/index.htm

Aga is manufactured by Aga Foodservice Group which is listed on the London Stock Exchange. The company's code is AGA.

This company is a producer of premium range cookers and refrigerators for the domestic, commercial and bakery markets and is a home interiors retailer. Their consumer brands include Aga, Rayburn, La-Cornue, Rangemaster, Fired Earth, Grange and Domain.

The company had a record first half and its outlook continues to be good.

A review in their latest annual report states:

"* In food service, strengthening order books should offset a quiet first half. The Infinity Fryer will provide momentum next year.

* Strong cash flows, after accounting for £9 million share buy-back expenditure, reflected the focus on raising returns from capital investment made.

* Dividends increased by a further 14 per cent as the benefits of the strategy emerge."

"Aga Foodservice has made good progress in the first half. In our core cooking and refrigeration activities we have outstanding market positions and potential and have enabled us to make good progress in the first half. The investment made in product, equipment and the distribution structures is now underpinning top line growth, improving the return on capital and raising returns for shareholders."

The current share price is around 2.50 pounds and the share price over the last five years has been up and down ranging from 1.50 pounds to 3.00 pounds. Share price is currently up sharply in the last several months and yet is still selling at a low 11.9 PE ratio.

Top shareholders are mainly large UK investment firms including

Cazenove, M & G, Legal & General, Framlington, Standard Life and Aberdeen Asset Management.

You can learn more about AGA at http://www.agafoodservice.com

and

http://uk.finance.yahoo.com and londonstockexchange.com

Plus you can get details from Thomas Fischer at Jyskebank at FISCHER@jyskebank.dk Learn more about joining Thomas and me for our next investment update at http://www.garyascott.com/catalog/ibezecuador.html

Until next message, good investing!

Gary


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