GGG

Listened to the conference call on Graco (GGG) and had some more points to make:

1. As I said, cash flow improved, revenue growth numbers showed sequential improvement (not a surprise given stronger GDP of Q2) but they are not out of the woods yet -- growth comparisons get harder in the 2H and both housing and auto production are struggling.

2. These are cyclical issues that will be resolved over time -- note that as growth in the economy accelerated in Q2 the company also saw better growth -- nothing wrong with the franchise that couldn't be fixed by faster growth in the industries they serve.

3. It's a great business -- in a recent presentation that is on the website, the company points out that earnings have a growth rate over the last few years of 23% while their stockholder's equity has only grown 10% and other than recently they have had no debt (short term debt is up due to share repurchases). That means they are able to grow earnings without needing a coresponding growth in capital -- that is a wonderful business.

4. new product process -- they are constantly coming out with new and improved products -- that keeps customers willing to pay good prices for products -- they also use the new product process to appeal to new customers. What I mean is they tweak some existing products to better suit a new set of customers -- that's a great growth driver because you are getting more revenues from little incremental costs.

5. Its a tough time now but this is a wealth builder over time.