Bricks-and-mortar book retailing has always been a tough business and is only getting more challenging as consumers shift to online purchases and the reading of digital books on electronic reading devices. Unfortunately for Barnes & Noble (NYSE:BKS), its core retailing business appears to be declining more rapidly than expected. It remains to be seen how much cash flow generation has deteriorated, but the implications are significant as the company will have to spend heavily to compete with a new set of rivals for digital books.
Many investors have tired of positioning their portfolios for a housing recovery. Consistently positive growth trends are probably still a ways off, but there is no denying that sales activity remains well below normal levels, making a recovery a matter of not if, but when it occurs.
Consulting and business outsourcing giant Accenture (NYSE: ACN) reported third-quarter results this week that indicated businesses are shifting gears from survival mode to investing for the future. The trends are encouraging for the global economy, as well as prospective investors in the stock.
Spice, herb, and extract provider McCormick (NYSE: MKC) reported second-quarter earnings results June 24 that came in ahead of analyst projections. The firm is unlikely to grow rapidly, but an extremely steady sales base and overseas expansion prospects bode well for investors going forward.
Posted: Jun 25, 2010 11:00 AM by Ryan C. Fuhrmann Darden Restaurants (NYSE:DRI) closed out its fiscal year with a mixed fourth quarter. However, the full year was much more stable and served as an illustration that the company has been one of the safest bets in the industry over the longer haul.
Leading cruise line operator Carnival Corp. (NYSE:CCL) (NYSE:CUK) reported second quarter results on Tuesday that demonstrated booking trends are improving after a couple of down years. However, profits continue to be buffeted by volatile fuel costs and its ships continue to be expensive to run and build. As a result, another firm operating on its decks may be a smarter industry play.
Stock market volatility has caused many investors to question their commitment to buying individual stocks. This combined with a decade of flat to slightly negative stock market returns has stoked a debate over whether buy-and-hold investing makes any sense going forward.
Defensive-minded investors looking to lower equity volatility while still capturing the upside from bull-market returns should consider adding convertible bonds as an asset class. Convertibles combine some of the best features of bonds and stocks. The bond  component offers income potential through a coupon  payment and downside protection because a convertible trades more like a bond in a declining market and principal  is returned if there is a standard maturity date .
Consumer good firm J.M. Smucker (NYSE:SJM) boasts that it can “help families create memorable mealtime moments,” and has done so for more than 100 years now. The addition of a leading coffee brand two years ago has helped it deliver on this mission, but may have made sales growth more of an uphill battle going forward.
FactSet (NYSE:FDS) specializes in providing financial systems and services to firms and individuals operating in the investment industry. The firm has developed a loyal following among its clients and continues to sign new clients. Profitability is also stellar, but the current stock valuation is lofty.
The oil industry is in the midst of dealing with one of the largest spills in history. The consequences could be dire for firms focused on offshore drilling, with a current six-month moratorium on drilling in the United States and a slew of new regulations and safety procedures being prepared across the globe. Prospects for the entire industry have also taken a hit.
Many investors are using the current calamity as an opportunity to pick up shares of major industry players, even BP (NYSE: BP ) itself, on the cheap. However, firms directly affected by the spill face uncertain political and business risk and could remain dead money for many years to come. Another strategy is to look at other leading energy firms that have traded down because the market is painting too broad of a negative brush stroke across the industry.
Consumer electronics titan Best Buy (NYSE:BBY) reported first quarter earnings on Tuesday that came in well below analyst expectations. Management brushed off the shortfall as a short-term blip and stuck to its full year guidance. It also expects profits to improve at a steady pace over the longer haul, but a number of factors are currently working against these ambitions. (Learn to pick out your investments on your next trip to the mall in our related article Analyzing Retail Stocks.)
Posted: Jun 15, 2010 10:47 AM by Ryan C. Fuhrmann
Shares in BP plc (NYSE:BP) were hammered again last week on continued criticism over the oil spill debacle in the Gulf and speculation that cleanup costs will escalate into the tens of billions of dollars. The stock reached a new low and has lost nearly half of its market capitalization, which now stands at $99 billion. At this point, the valuation has been unduly punished and represents a very interesting risk/reward tradeoff for brave investors.
Ski-resort operator Vail Resorts (NYSE:MTN) owns a handful of one-of-a-kind mountain assets and real estate. Strong third quarter results were indicative of the earnings potential from its operations, but the stock valuation and high costs to run its operations could end up snowballing investors.
Posted: Jun 10, 2010 08:35 AM by Ryan C. Fuhrmann
Cascade Corp (Nasdaq:CASC), which supplies loading products for industrial lift trucks, reported fiscal first-quarter financial results on Monday that came in well ahead of analyst projections. Despite the upside surprise, the shares don’t hold much upside potential, though the results do lend insight into the current state of global economic activity.
The past decade has been tough for stocks, with the bursting of the Internet and housing bubbles creating share price volatility too extreme for many investors. As for blue chip companies, sky-high valuations in 2000 have left little in terms of total stock returns, even though earnings growth at the most stable firms has continued apace during this timeframe.
One leading firm has taken a unique approach to creating value for its shareholders by slowly breaking itself into pieces. One of the first transactions was the spinoff of handbag maker Coach (NYSE: COH ). Investors that got in on the ground floor about a decade ago have seen a 20-fold increase in Coach’s share price. In 2006, the firm in question spun off Hanesbrands (NYSE: HBI ) to shareholders. Hanesbrands shares have returned about +50% since then, well ahead of the overall market’s return of a little more than +15% during this timeframe.
Posted: Jun 08, 2010 08:24 AM by Ryan C. Fuhrmann
China Finance Online (Nasdaq:JRJC) bills itself as the only financial website portal firm available for U.S. investors to invest in on domestic exchanges. It also happens to be a leading portal in China in its own right, and is one of the few ways for a burgeoning class of individual investors to track stock indexes in China and learn about individual companies.
The major credit ratings agencies continue to be caught in the crossfire of finger pointing that has occurred since the housing bubble burst and fanned the flames of a major credit crisis in late 2008. There has been much talk of increasing regulation of these firms, and very recently the Senate passed reforms on the ratings firms as part of financial services reform legislation.
But this is no reason for investors to stay away from the ratings agencies. In fact, somewhat stringent regulations and continued attacks on the ratings agencies could actually turn out to be extremely positive for new investors. The business model  of the agencies should remain impressively profitable. Additionally, negative sentiment has sent share prices to very depressed levels that now easily account for any downside risk to cash flow  and earnings.
In investing, boring can be beautiful. Many investors like to chase stocks with hot new products from the likes of Apple (Nasdaq: AAPL ) and Google (Nasdaq: GOOG ), with the tradeoff being that emotions can create volatile stock prices as greed and fear play as much a part as underlying business fundamentals. However, a multitude of firms sell more mundane products or services that can be counted on for consistent profits, more stable and even higher shareholder returns over the long haul.
Private equity firms are keen on boring businesses that throw off tons of cash, and one favorite area of this bunch has historically been the financial transaction processing industry. The industry consists of companies that own the systems and technology for processing billions of transactions that allow consumers to make credit card payments at their favorite retail establishment. Banks also transact to handle customer deposits, withdrawals and just about any financial process imaginable.
After years of asset sales and divestitures, packaged food firm Sara Lee (NYSE:SLE) is a shadow of its former corporate self. Most of the appealing businesses have either been sold or spun out to shareholders, but what remains still holds promise for those hoping to make a buck, and should be realized through a number of appealing scenarios.
Data storage firm EMC (NYSE:EMC) is in an enviable situation due to its leading position in the industry, an improving economy and a secular demand trend supporting its hardware sales, service revenues and virtualization data capabilities. A major stock run left the shares fully valued, but they are worth keeping an eye on to see if they fall back to more reasonable levels.
Stocks with scant analyst coverage often offer opportunity for individual investors to exploit market inefficiencies. The small-cap arena is usually the most fruitful place to uncover these opportunities, but every now and then a firm with a larger market capitalization  will fail to get the attention it merits from Wall Street.
One firm has fallen out of coverage in the United States simply because it was acquired by a rival across the pond in Europe. As a result, only four analysts currently provide earnings estimates. There is some international coverage, but in aggregate, analysts keeping tabs on the company is woefully inadequate given the firm has a market cap of $76 billion and is one of the five largest consumer goods firms in the world.
The firm in question is Anheuser-Busch InBev (NYSE: BUD ), one of the largest brewers in the world. Belgium-based Inbev acquired St. Louis-based Anheuser Busch, also known endearingly as the “King of Beers”, in the middle of 2008. The newly-formed company established an American Depository Receipt on the New York Stock Exchange last year to again reach out to U.S. investors.
On May 6th, a group of heavyweight private equity firms began to circle the wagons. The aim: the largest private equity buyout  since the financial crisis began in 2007, a deal estimated to be worth nearly $15 billion.
Discussions continued for almost two weeks, but a final agreement was never reached. The press hasn’t been able to fully explain why the deal was never sealed. Shares lost as much as -20% of their value in the aftermath.