Garmin is traveling in a new circle. The stock of the GPS device maker was added to the Standard & Poor’s 500 index after the stock market closed Tuesday.
The stock has climbed nearly 7 percent since the index change was announced last week. Stocks typically rise following news that they’re being added to a major index. That’s because mutual funds and other institutional investors that track the index update their portfolios by purchasing shares.
But should you own Garmin for the long term? Over the last 10 years, it has rewarded investors with a nearly 16 percent annual return compared with 7 percent for the S&P 500. But that masks that the stock is still 64 percent below its pre-recession high of $119 in October 2007.
Financial analysts give the stock an average hold rating. Weak auto sales in Europe continue to weigh on the stock, as does increased competition from smartphones with mapping technology. They’re both reasons Garmin is diversifying its revenue base. In 2011, devices for autos generated 58 percent of revenue. That figure was down from 70 percent in 2009.Associated Press