http://www.latimes.com/business/la-fi-guitar28jun28,0,1148623.story?coll=la-home-businessGuitar Center Inc., which opened its first store in Hollywood almost half a century ago and expanded to become the largest purveyor of musical instruments in the U.S., is being acquired for $2.1 billion.
In the late 90's, GC stock was 10 bucks per share. I sold it, like a stupid ass, and bought biotech stocks which quickly went up and then crashed miserably and never came back again. Guitar Center just sailed right through all the madness of that time.It has steadily climbed, ignoring the crash of 2000 and now is at 60 bucks a share!I did rebuy some at 41 per share last year some time.Financial "analysts" have continually underestimated this company, for example:<b<DOWNGRADE: Guitar Center (GTRC) downgraded by Dougherty & Company from Buy to Neutral was posted at the end of June this year. About 2002, some one on the Fool told people to short the stock, that is, bet it will tank.At the time I posted on this board not to do this. The financial "analysts" said they had too much inventory. I didn't agree in this case.I argued that the inventory never decays, and can always be sold, no matter how old it gets.The stock went up sharply thereafter and any one who shorted the stock lost his shirt.Whatever anyone thinks of GC, it has brought affordable and expensive guitars to the general public.Their business model is simple - sell lots of cheap very high quality guitars primarily to beginners. They are easy to play so the kid learns easily and doesnt quit, as in the old days when cheap guitars were strung like bows and arrow and were unplayable and frustrating to beginners. The only playable ones were relatively expensive - like strats and les pauls and beginners or rather their parents were not willing to spend 300-500 bucks on an instrument for a kid. They bought cheapies, the kid couldnt play it and quit - and no customer.The high quality Squiers and the like are easy to play - they are sold with a cheap but decent sounding amp and the parents dont mind spending a hundred or so bucks to give their kid a stab at it. The kid learns to play and then a few years later goes back and gets himself an expensive guitar and amp. In effect these affordable high quality guitars CREATE CUSTOMERS FOR LIFE. GC has led the way to this and they service both the entry level people, make them lifelong customers and then service them when they are advanced.Great business model and can't lose.At least that is my take on it.By the way, I don't have the foggiest idea about business or investing. My trade is electrical engineering and math and physics. So I am not knowledgeable in financial matters at all.It is just common sense to me.JMHOEd
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