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Garmin(GRMN - Get Report) is one of those stocks that seems crazy to go short against. The firm boasts huge profitability, no debt, more than $2.5 billion in cash and investments (paying for around 30% of its market cap right now) and a huge 4.3% dividend payout.
But shorts are betting that increasing competition in the GPS business will torpedo those stellar financials and send the stock sinking. That's why Garmin currently has a short interest ratio of 18.7, indicating that it would take almost a month for shorts to cover their bets.
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It's true that consumer GPS devices aren't a very attractive business anymore. Units are becoming commoditized, margins are dropping, and other devices (such as cellular phones) are taking their place as navigators. But if anyone can shake the industry headwinds, it's Garmin. For starters, the firm still earns hefty margins on automotive GPS units, as well as an impressive share of other lucrative markets for GPS: Outdoors, boating and aviation are just a few. Ask any pilot who owns the navigation market in general aviation (or look at the firm's amazing $50,000 G1000 avionics suites), and Garmin is the clear winner.
Exposure to those other high profit, low volume markets enable Garmin to pour R&D into big-ticket electronics and then transition the tech to the more margin-sensitive consumer market. While the breakneck growth of consumer GPS is effectively over, Garmin's business model isn't.