Posted: May 31, 2010 09:00 AM by Ryan C. Fuhrmann

Big-box warehouse retail chain Costco (Nasdaq:COST) posted third-quarter results on Thursday that indicated shoppers are starting to spend on more discretionary items again. Given the firm’s higher-end focus, its domestic prospects are really looking up and put it in a more favorable position than archrivals. The share price valuation currently discounts most of this upside, but Costco is as steady a retailer as investors will find out there. 

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Posted: May 28, 2010 10:26 AM by Ryan C. Fuhrmann

Cracker Barrel Old Country Stores (Nasdaq:CBRL) operates nearly 600 locations that offer a sit-down, “home-style food” restaurant with a retail concept “reminiscent of America’s country heritage.” The combination has turned many otherwise fickle food patrons into a loyal customer base. Vicinity to convenient highway stops hasn’t hurt either. Sales stability coupled with old-fashioned cost cutting makes the stock worth a good, hard look.

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Posted: May 27, 2010 08:51 AM by Ryan C. Fuhrmann

Growth prospects for the major players in the packaged and processed food industry continue to look uninspiring given their limited sales expansion prospects. Campbell Soup Co. (NYSE:CPB) confirmed this top-line predicament when it reported third-quarter results on Monday morning, which reflected stable growth, yet would not be able to give investors double-digit returns. Currency effects provided a boost to reported sales growth, and earnings increase was robust. Whether or not such increases can be maintained is a matter of speculation.

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Many publicly-traded firms are in a steady state of flux, acquiring rivals and jettisoning businesses no longer deemed core to the parent company [1]‘s mission. Both situations can be lucrative for astute investors — buyouts can deliver big premiums over current market values, and spinoffs can create an opportunity for new management teams to rejuvenate a former corporate step child and unlock hidden upside value for shareholders.

Once such firm was spun off from paycheck processing giant Automatic Data Processing (NYSE: ADP [2]) to shareholders in March 2007. Ironically, its business is handling proxy [3] materials for corporate actions like votes on board memberships, takeovers and, in this case, a spinoff. But luckily for value-minded investors, ADP’s trash could very well turn out to be a treasure find.

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Diversified technology giant Hewlett-Packard (NYSE: HPQ) reported second quarter results May 18 that came in ahead of expectations. The upside was driven by robust trends in its personal computer, storage and server, and printer businesses. Longer term, these cyclical divisions could prove a drag on company fortunes. As a result, other firms in the industry are stronger investment candidates.

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Retailing giant and industry bellwether Wal-Mart (NYSE: WMT) reported first quarter results May 18 that saw profits come in ahead of analyst projections. U.S. store sales trends came in a bit light, but the firm has its sights firmly set on international growth and is expanding at an impressive pace. Given the reasonable valuation, investors should consider hopping on board.

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Human resources (HR) consultant and business outsourcing provider Hewitt Associates (NYSE:HEW) reported a tepid second quarter as sales growth was modest and profits declined. The firm has a better long-term track record of growing earnings and cash flow. Investors should consider using near-term weakness as an opportunity to pick up the shares on the cheap.

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Home improvement giant Lowe’s (NYSE:LOW) reported first quarter earnings on Monday morning ahead of analyst projections. However, investors were disappointed by the firm’s outlook for the coming quarter and sent the shares on a downward path. This trajectory shouldn’t last too long as the industry has yet to recover to pre-crisis levels in terms of residential spending on improving and maintaining their residences.

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Investing in small market capitalization [1] stocks is a time-tested approach to beating the stock market. For starters, it is easier for small companies to grow the top line rapidly because new business can have a significant impact on their smaller sales levels. They can also be less bureaucratic, which keeps costs low and allows more sales to fall to the bottom line [2] as profit. And finally, they tend to be less followed by Wall Street analysts, which gives smaller investors a better opportunity to find undervalued companies.

A current opportunity for value investors and income-seeking individuals as well is Eau Claire, Wisc. based National Presto Industries (NYSE: NPK [3]). National Presto operates three disparate business units that each have their own appeal.

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Posted: May 14, 2010 11:43 AM by Ryan C. Fuhrmann

After an extremely difficult stretch brought on by the credit crisis, upscale department store retailer Nordstrom (NYSE:JWN) is finally seeing clients return to its flagship store with open wallets. Its share price ran up in anticipation of its sales and profit recovery, but a pullback from a new round of macroeconomic worries has placed the valuation back in more reasonable territory.

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Posted: May 14, 2010 09:40 AM by Ryan C. Fuhrmann

In 2006, fast-food dining chain Wendy’s (NYSE:WEN) spun Tim Hortons (NYSE:THI) out to shareholders. Tim Hortons boasts itself as the largest restaurant chain in Canada, though this is still an understatement given it has achieved iconic status in the country, due in part to the fact it was named after a hockey legend. Having already wrapped up its home market, its sights remain firmly south of the border, where it is currently only a bit player and has ample expansion opportunities.    

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In early 2007, payroll processor Automatic Data Processing (NYSE: ADP) spun out Broadridge Financial Solutions (NYSE: BR). A weak stock market over the past couple of years has left shares of Broadridge little changed from levels when they first became public. At current levels, the market is not giving Broadridge the credit it deserves for its stable business model and subsequent downside protection. Better yet, recent events could indicate upside potential for shareholders.

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Though nearly a decade apart, Japan and the United States both experienced severe stock market and real estate bubbles. Each bubble has its own similarities, but certain structural differences also exist in each country. These two cases help explain the unique circumstances that have marked the creation of and subsequent bursting of the most severe bubbles throughout history.
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The ramifications of the credit crisis in the insurance industry are still being determined as regulators throughout the globe are scrambling to settle on the appropriate capital levels and financial cushions these firms must satisfy to stave off a future calamity. But despite the worries, conditions are quickly returning to normal, with clients starting to spend again on obtaining insurance coverage. Investment portfolios are also benefitting as liquidity returns to equity and fixed income markets.

Despite the improving business fundamentals, insurance industry valuations are lagging recovery prospects and are stuck at multi-year lows. A primary industry measure is the price to book ratio, with many industry leaders sporting stock prices that are trading below book value [1], or total shareholders’ equity on firm’s balance sheets. Better yet, many of these same firms are trading at single digit earnings multiples.

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Drug distribution firm McKesson (NYSE:MCK) closed out its fiscal year on Monday on a bullish note. Investors applauded its full-year profitability and outlook, but a lower overall stock market has kept the shares from reaching new highs. At current levels the stock is worth a further look.

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Consumer products firm Clorox (NYSE:CLX) reported financial results on Monday morning and bottom-line growth that was right in line with its historical growth trends. Forward expectations are similar, and though this may not lead to outsized gains for investors, Clorox can be counted on for high single-digit returns in any economic climate.  

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Posted: May 03, 2010 10:01 AM by Ryan C. Fuhrmann

Life insurer MetLife (NYSE:MET) reported first quarter earnings on Thursday after the market close that demonstrated it has seen almost a full recovery from the credit crisis. The potential for further improvements and a major global acquisition bode well for shareholders, though there is no hurry to jump in with both investment feet.

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