My niece is a competitive swimmer. One of the tools of the trade for her is the Speedo swimsuit. In late 2003, I suggested to my sister that since her daughter was an avid swimmer, she might think about buying some stock in Warnaco Group (WRNC) as a neat way to teach her about investing. As far as I know, my sister never followed through on my recommendation (who really listens to their siblings?). That’s too bad because the stock has appreciated three times as much as the markets as a whole.

While the three-year run-up in price had its ups and downs, it was sitting at $17 dollars last August, less than one year later the stock has almost doubled. A lot has gone right for the company in recent months and the future once again looks very promising. Here at Rock Your Stock we believe in everyday investing, a concept built upon following what you know and do. In the case of my sister, she’s intimately aware of the success of Warnaco in two ways: the price she pays for my niece’s swimsuits. They aren’t cheap; and the number of swimmers wearing the Speedo brand at each and every meet she attends to watch my niece.

By keeping an eye on opportunities all around you, including Warnaco, consumers have a chance to benefit from their experiences. Every person has products and services thrust in front of them on a daily basis. When you believe in them by routinely purchasing their products, it makes abundant sense to invest in them as well. Why put your hard-earned savings into a semiconductor business you know very little about when you can buy stock in Richemont (CFR), the company that made your $10,000 Piaget watch. If you have enough confidence in the product to spend $10,000 on a watch, why wouldn’t you invest an equivalent amount in the company stock? Everyday investing says you should.

Warnaco is more then Speedo and swim wear. It has two other divisions, intimate apparel and sportswear, owning or licensing brands such as Chaps, Calvin Klein Jeans, Warner’s, Lejaby, and others. Here are some other positives about the company:

• Organic revenue was up 13 percent according to the first quarter *results.
• International revenue represents 48 percent, or almost half of total sales.
• There were sales gains in all three segments in the first quarter.
• Gross margins in the first quarter were three percent higher.
• Calvin Klein jeans and underwear contribute $1 billion to the top line with excellent growth potential for the future. A strong brand for sure.
• Intimate apparel has operating margins of 15 percent, one and a half times those of swimwear and sportswear.
• The company recently *raised its guidance for fiscal 2007.
• Earnings per share in 2007 expected to grow upwards of 12 percent.
• Direct to consumer (retail) business model growing in Asia and Europe. It now represents 14 percent of total sales. In Asia, retail generates 75 percent of the regions revenue.
• All valuation numbers are reasonable, especially price to sales, which is less than one.

Diversification, as long as it isn’t overdone, is a key component of any investment plan. Warnaco, by adding Calvin Klein in 2006, has added a strong third leg to an already exceptional business. The future no longer rests on the shoulders of America’s number one swim brand, Speedo, but with a collection of great names, we know and love.

That’s everyday investing at its best.   

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