| Ticker | Company | ±% | Price | Invest | ||
|---|---|---|---|---|---|---|
| SWIM | Latham Group | -2.31% | $5.71 | Buy stock | ||
If you think about popular segments that have sparked highly anticipated IPOs and subsequent stock rallies, chances are, software and other technology-based sectors rank among the top. Swimming pools? Not so much. Nevertheless, Latham Group, the largest designer, manufacturer and marketer of in-ground residential swimming pools in North America, Australia and New Zealand, surprised folks by its debut and investment potential.
Latham Group Financial History
For most markets, the initial onslaught of the COVID-19 pandemic devastated business due to the nearly complete erosion of consumer demand. Still, many sectors and individual companies managed a bounce back from the doldrums, with businesses that facilitated contactless services (i.e. video conferencing, e-commerce and streaming platforms) performing particularly well. But residential swimming pools? You’d be surprised.
According to Latham Group’s Form S-1 filing with the Securities and Exchange Commission, the company generated nearly $318 million in revenue in 2019, up 10.7% from the unaudited revenue of $287.2 million in 2018. Remarkably, in 2020, Latham rang up top-line sales of $403.4 million, up nearly 27% from the year prior.
Further, net income in 2020 was nearly $16 million, up 114% from the $7.45 million recorded in 2019. Even more impressive, the swimming pool construction industry in the U.S. took a hit because of COVID-19. Last year, total revenue dipped to $7 billion from $9 billion in 2019. Also, the number of swimming pool-related employees and businesses suffered a conspicuous blow.
Finally, Latham Group bolstered its presence in its core market through multiple acquisitions. Between November 2003 and October 2014, Latham acquired 5 companies. In addition, it invested an undisclosed amount in Narellan Pools on June 4, 2019.
Latham Group Potential
While swimming pools may not be your first choice for a viable stock in this unusual and challenging broader market environment, Latham Group just might deliver the goods.
First, the benchmark S&P/Case-Shiller U.S. National Home Price Index hit an all-time high of 238.5 points in January 2021. That’s up more than 11% against the year-ago level, reflecting tremendous demand for housing. For many consumers, a backyard with a swimming pool is a very desirable attribute, particularly in America’s Sun Belt region.
Second and on a related note, sellers lever a huge advantage in real estate right now. By building a pool or performing improvements such as pool liners (an area which Latham specializes in), they can probably receive even more money for their homes.
Third, the personal saving rate was 13.6% in February 2021, which is still a multi-decade high. Though people saving more money is deflationary by default, you can also look at it another way: consumers now have more money to spend based on their savings from last year.
This could result in big purchases for swimming pools, either to bolster a home sale price or for personal enjoyment.
How to Buy Latham Group (SWIM) Stock
Since SWIM just debuted, you can trade just like any other member of the general public. If you already know how to buy stocks, the process will be straightforward for you.
And if you don’t, fear not as you can read up on the steps to take below.
- Pick a brokerage.
Before you can start any journey with the capital markets, you must pick a brokerage. Several years ago, the choice you made had consequence because the fees brokers charged varied substantially. Today, the advent of ultra-convenient mobile platforms introduced massive competition in the space.
For you, this means that most of the financial incentives to join -- such as commission-free trading -- are similar or identical. Therefore, you can focus on important matters such as lifestyle and investing ambition.
For example, if your calendar is filled with obligations, then a trading app may be just perfect for your needs. On the other hand, if you want to develop your investing acumen, you should elect a full-service platform. - Decide how many shares you want.
Deciding your share count encompasses both your profitability potential and your risk exposure. In other words, the more shares you have, the higher the returns on your holdings if the target stock moves up. However, the opposite is true if the stock experiences downside volatility.
Therefore, pick a share count that you are comfortable with. Save the big dollar bets for only your highest conviction stock. Otherwise, for lower confidence names, you should mitigate your exposure.
Whatever the magic number is, write it down or commit it to memory. When the market opens, trade based on your well-reasoned game plan, not on the emotions of the moment. - Choose your order type.
Now for the most complicated, make sure you understand these basic market concepts and the order types necessary to conduct transactions.
• Bid: The bid is the maximum price a buyer will offer for a stock. It is always lower than the ask.
• Ask: In contrast, the ask is the minimum price that a seller will take. It is always higher than the bid.
• Spread: The bid-ask spread is the difference between the bid and ask price. Fundamentally, though, it’s the de-facto indicator of market liquidity and risk. Narrower spreads signal greater liquidity and lower risk because you should easily find a buyer for your stock. Wider spreads indicate lower liquidity and higher risk because buyers are not nearly as plentiful.
• Limit order: Market valuations always fluctuate. To get shares at a specific price, place a limit order, which only fulfills at your predetermined price. Please note that no guarantee exists that your stock will reach said price, which could leave your limit order hanging unfulfilled.
• Market order: Use a market order if you instead want to buy shares at the going rate. Market orders automatically fulfill at the next available price though at unfavorable rates -- buy orders on the ask, sell orders on the bid.
• Stop-loss order: Place a stop-loss order to protect your portfolio. This order type exits you out of your position at a predetermined price or the next available price, whichever comes first. The main risk is a gap-down session, which is where a stock opens at a much lower price than the prior session’s close.
• Stop-limit order: To prevent ugly surprises, use a stop-limit order. Here, if you suffer a gap-down session, this order type will not exit you until the target stock reaches your predetermined price. Of course, there’s no guarantee this will happen. - Execute your trade.
To execute your trade, follow these steps for a market order:
• Select action type (buy or sell).
• Enter the shares you want to acquire (or sell).
• Hit the buy (or sell) button.
Follow the same steps above for a limit order, with the exception that you must add your desired execution price.
Best Online Brokers
Below is a list of best brokers to consider.
- Best For:Active and Global TradersVIEW PROS & CONS:Securely through Interactive Brokers’ website
- Best For:Global Broker for Short SellingVIEW PROS & CONS:securely through TradeZero's website
A Quirky Little Stock Timed Just Right
Considering a swimming-pool-related stock may be a first for you, especially amid the sea of software companies going public. But that doesn’t mean Latham Group has nothing to offer. Because demand for real estate is sky high, it’s possible that SWIM stock can positively surprise Wall Street. Further, the company’s financials demonstrate that consumers love its products.
About Joshua Enomoto
His distinct writing style of distilling convoluted data into relatable and compelling narratives has earned him recognition among several investment-related publications.