By Ryan FuhrmannPublished 02/28/2011 – 12:00
Sooner or later, every company’s growth prospects hit a wall. Companies that grow rapidly have an even tougher time, as the corporate culture is built around rapid expansion and growing market share as quickly as possible. Technology firms, in particular, face intense competition and short product-development cycles, making it easier for rivals to sell products that build upon another’s development success.
TJX Companies (NYSE:TJX) runs a stable of off-price store concepts. This focus proved ideal during the credit crisis and ensuing economic recession, but is widely believed to be a liability as consumers trade back up to more fashionable alternatives. Management’s contention is that value is always important, and its financial results over the past decade confirm this is true.
Wal-Mart’s (NYSE:WMT) U.S. struggles have been widely documented, and were confirmed when the company reported fourth-quarter results on Tuesday. Management is working on a number of fixes, but the international store base continues to do extremely well and overall the stock looks appealing, based on a reasonable earnings valuation.
Traditional department store retailer Macy’s (NYSE:M) continues to benefit from an improving economy and return to stocking merchandise, according to local styles and tastes. Past merchandise miscues after a long string of acquisitions combined with a recession mean its track record is still dismal, but management is quickly developing a reputation for consistency.
By Ryan FuhrmannPublished 02/24/2011 – 11:00
So far this year, the market (as measured by the S&P 500 Index) has rallied almost 5%. In stark contrast, this leading big-box retailer is down about 15% to start off 2011 and is trading near its lows of 2010. I can’t find any valid reason for this near-term disconnect.
Waste Management (NYSE:WM) capped off its full year with solid fourth-quarter sales growth. This kept total annual growth in the mid single-digits, but investors shouldn’t get excited that these growth levels will continue.
Upscale retailer Nordstrom (NYSE:JWN) reported fourth quarter earnings on Thursday that saw solid sales and profit growth. Much of the upside is still coming from a recovery in spending trends after the credit crisis and subsequent recession, but future growth will be led by new store growth.
North American beverage firm Dr. Pepper Snapple (NYSE:DPS) closed out 2010 with modest sales growth and solid profit growth for the full-year period. It expects another strong year of earnings improvements for the coming year, but beyond that, it’s difficult to see where shareholder growth is going to stem from.
By Ryan FuhrmannPublished 02/18/2011 – 13:30
A profitable investment strategy is to buy into a stock with a major catalyst  that can potentially take hold and send a stock price higher. That’s obviously easier said than done, but many savvy investors who identify a catalyst early on can often snag the stock just before it moves and before the rest of the crowd.
j2 Global (Nasdaq:JCOM) reported fourth-quarter results to demonstrate that growth may be returning to its services. It used its solid financial position to acquire a number of rivals during the downturn, and could continue to pursue bolt-on purchases to supplement internal growth trends. A larger rival could also swoop in to acquire j2, to offer its services to an even wider customer base.
Posted: Feb 16, 2011 14:00 PM by Ryan C. Fuhrmann
For more than five years, Marsh & McLennan (NYSE:MMC), a company that specializes in insurance, consulting and risk management, has dealt with a slew of regulatory issues and related litigation matters. It released 2010 results on Tuesday that indicated the majority of its company-specific problems have finally been put to rest, and what remains is a firm focused on two primary businesses with solid profit potential. The businesses are performing well, but there is still some uncertainty as to how fast they can grow on their own going forward.
Finding out what a billionaire is doing with his or her money can be a great tool to finding areas of the market that are likely to perform well going forward. And in the vast majority of cases, investing billionaires became wealthy by focusing on a select handful of businesses that have performed extremely well on their watch. In other words, they became wealthy by putting all of their eggs in one (or just a few) basket and watching that basket very closely. Many have diversified their personal holdings but continue to hold concentrated stakes in their firms. (Learn when you will become a billionaire at your current income, check out What’s Your Billionaire Age?)
Posted: Feb 16, 2011 08:38 AM by Ryan C. Fuhrmann
Insurance and reinsurance provider XL Capital (NYSE:XL) reported fourth-quarter results with earnings that came in ahead of analyst projections. The recovery in its core business since the credit crisis has been impressive and has come through in the form of a strong stock rally. Gains going forward will be contingent on a return on equity that returns to pre-crisis levels.
MetLife (NYSE:MET) is the largest life insurer in the U.S. and just finalized an acquisition that makes it a leading player internationally. Cost-cutting moves and more appealing growth prospects overseas should boost total returns for shareholders going forward. Fourth quarter results released late last week also suggested that the domestic business has fully recovered from the credit crisis.
Buying into a restaurant franchise that has plenty of new store development opportunities can be a profitable investment strategy. Buffalo Wild Wings (Nasdaq:BWLD) represents such an opportunity, and its fourth-quarter results demonstrate it is still easily able to leverage strong sales growth into even higher profit improvements. The stock recently reached its highs for the year, but could still be worth a close look if growth continues at this rapid pace.
By Ryan FuhrmannPublished 02/11/2011 – 11:00
Perhaps the easiest way to profit from higher oil prices is to buy shares of the largest energy firms in the world. These companies are referred to as “integrated” oil and gas firms, which stems from the fact that they are involved in just about every facet of the industry. This includes the upstream business, which refers to exploring and producing fossil fuels, as well as downstream, which is related to the refining and marketing of the fuels to sell to consumers.
Medical instrument and supply provider Becton Dickinson’s (NYSE:BDX) first quarter was uncharacteristically soft, but its full year guidance suggests another annual period of leveraging single digit sales growth into double digit profit growth. The company has done this consistently over the past one, three, five and 10 year periods, which investors have taken note of by bidding up its share price.
McKesson Corp. (NYSE:MCK) and archrival AmerisourceBergen Corp. (NYSE:ABC) are two of the largest drug distributors in the country. Their services form the backbone of getting drugs from manufacturers to drug retailers and hospitals where end-patients can obtain their medicine. McKesson released third-quarter earnings on Monday that saw continued strong results and robust trends from distributing generic drugs. The stock price has had a strong recent run but the fundamentals suggest further upside potential over the next few years.
Posted: Feb 10, 2011 14:34 PM by Ryan C. Fuhrmann
Montreal-based Gildan Activewear (NYSE:GIL) has grown into a dominant provider of blank T-shirts and related apparel that it sells for screen printing and other related customization. During the firm’s fiscal first quarter, which the firm reported on February 8, its sales jumped considerably. In fact, the company wasn’t able to keep up with demand, which even hurt profit growth slightly. This is mostly good news, but there are also concerns that cotton price inflation could dent profit trends for Gildan in the near term. However, given the company’s growth track record, a drop in the stock could represent a solid buying opportunity.
By Ryan FuhrmannPublished 02/09/2011 – 07:30
Consumer spending has been improving for at least a year now, but you wouldn’t know that by looking at the stock price charts of the retailers across the United States. This disconnect is somewhat confusing given the holiday shopping season was strong, as was January when shoppers stayed busy grabbing end-of-holiday deals. [See yesterday's Chart of the Day  for more on this…]
Insurance brokerage firm Aon (NYSE:AON) significantly boosted its human resource service capabilities with the acquisition of in-town rival Hewitt Associates. The deal should boost profits going forward, but the firm could still struggle to grow sales enough to justify the current earnings multiple. Cash flow trends have also been difficult to discern.
Customers rely on Dun & Bradstreet (NYSE:DNB) for “insight about businesses”, or namely, the ability to see if suppliers and their customers can pay their bills. Just like a credit check on individuals that firms such as Equifax (NYSE:EFX) and Fair Isaac (Nasdaq:FICO) specialize in, D&B operates a host of websites and databases that lets businesses check on other companies. It released fourth-quarter results on Thursday that saw U.S. sales rebound while international continues to grow briskly. Overall growth remains challenging, though the company is working to improve.
Tupperware (NYSE:TUP) is a direct seller of storage and serving solutions for the kitchen and also operates a smaller beauty segment that offers cosmetics and related personal care items. The business model is appealing because it is highly profitable and is proving popular in emerging markets where retail infrastructure isn’t highly developed. The firm’s fourth quarter results demonstrated these factors, and though the stock jumped sharply after the financial release, the valuation is still reasonable.
Posted: Feb 04, 2011 09:09 AM by Ryan C. Fuhrmann
Consumer goods giant Procter & Gamble (NYSE:PG) has been on a quest to regain market share lost during the recession as consumers traded down to more affordable and private-label brands. Second quarter results released Thursday indicated it is indeed recovering share, which should help it achieve double-digit shareholder returns over the long term.
Orthopedic implant and medical and surgical equipment provider Stryker (NYSE:SYK) closed out its year by reporting improving sales and profit growth. Its operations were unexpectedly hit during the recession but are recovering nicely and have great long-term appeal. Moreover, buyout speculation in this space means multiple avenues for high shareholder returns.
Food has a reputation as a product that is not only recession-resistant, but certifiably recession-proof. No matter the state of the economy or point we are in the business cycle, people have to eat.
Of the traditional grocery chains, Kroger (NYSE: KR ) is the largest player, with a single-digit market share, and has done a solid job of maintaining profitability in the face of intense competition. It has focused on growing internally and keeping operating costs low, which it passes on to shoppers in the form of lower prices. The company constantly remodels stores too, but this eats too much into free cash-flow generation and as a result, it doesn’t have much investment appeal.
Defense firm Raytheon (NYSE:RTN) reported fourth quarter earnings on Thursday and provided an outlook that suggests growth will be tough as the Pentagon reduces overall defense spending. Overall, industry share prices will likely struggle to rise significantly in the near term. Given the top-line headwinds, merger activity could heat up and see some players snapped up above current share price levels. Geopolitical risks also make these good hedges should tensions rise in areas such as the Middle East or the Koreas, and Raytheon deserves attention as a top potential holding in the space.