Apollo Group (Nasdaq:APOL) operates for-profit education provider University of Phoenix. The industry is in a state of flux, and while Apollo reported second quarter results on Tuesday that largely met expectations, it expects sales and profits to fall for the next couple of years. The firm remains firmly profitable, but the stock will likely remain stagnant until operating conditions are more favorable.
Electronics retailing giant Best Buy (NYSE:BBY) continues to face sales headwinds at its U.S. store base. The issue is whether this is related to flagging popularity of previously must-have items, or this is due to a more serious matter that consumers are increasingly heading online to purchase electronics. For now, the struggles appear to be related to the former, which means the shares are worth a close look.
Less than a year ago, China unveiled what it considered to be a younger and stronger statue [1] of a bull to rival the one sitting on Wall Street in New York. The fact that it is also larger shows China’s ambition. With an economy averaging growth of 8% to 9% a year, it won’t be long until these ambitions are realized.
Posted: March 29, 2011 1:38PM by Ryan C. Fuhrmann
Everyone likes a corporate comeback, but it means that certain investors suffer heavy losses as a firm first falls from grace. This can happen because of bad management, a changing competitive market or other unfortunate events outside of a company’s control. The subsequent recovery, if it happens at all, can take time. For a small handful of companies, however, the comeback returns a company to its former glory. Below is a list of the five best corporate comebacks in recent years where both the company’s operations and share price experienced impressive rebounds. (We’ll give you the clues you need to assess which stocks can make a turnaround. See Catching Comeback Stocks For Clients.)
Darden Restaurants (NYSE:DRI) reported solid third-quarter results on March 24 and earnings that beat analyst projections. However, investors chose to focus on near-term food inflation. This could dent profits in the short run but will likely do little to derail the company’s impressive and consistent ability to leverage high single-digit sales growth into double-digit profit growth, which it has done for at least a decade now. (For background reading, see Sinking Your Teeth Into Restaurant Stocks.)
Leading online Chinese financial portal provider China Finance Online (Nasdaq:JRJC) again disappointed investors with anemic sales growth during its fourth quarter. Cash flow generation again picked up and was at impressive levels, but investor interest in the stock will likely remain negligible until the top line starts to consistently expand.
Packaged food firm General Mills (NYSE:GIS) is dealing with higher commodity costs by keeping a tight lid on other operating expenses and other related costs. This is allowing it to minimize charging higher prices for its food on retail shelves. Management met earnings guidance during its third quarter and expects to meet its financial targets for the full year. Its overall attention to detail has resulted in shareholder returns well above rivals over the past five years.
The life cycle of a company follows four distinct steps. The last two are maturity and decline, and both are generally not the stages when you want to invest. The first is introduction and covers the period when a company is in its start-up phase and progresses to introducing some product or service on the market. The second is the growth stage and is the sweet-spot for investors. This stage covers a period of time when a company is expanding briskly and starts to throw off decent profits. It’s also where investors can make quite a lot of money…
In the annual shareholder letter released Feb. 11 by Berkshire Hathaway (NYSE: BRK-B [1]), Warren Buffett announced the need for major acquisitions to help him grow Berkshire’s profits at a “decent rate.” Given the billions in cash Berkshire generates (Buffett estimates $12 billion in annual earnings power) in any given year, Buffett declared his “elephant gun has been reloaded” and that his “trigger finger is itchy” for big acquisitions.
Despite solid first quarter results, investors were spooked over the hit that Japan will inflict on creative software firm Adobe’s (Nasdaq:ADBE) near-term operating results. Those with a longer-term view will find the lower valuation a potentially appealing entry point in a firm that continues to grow briskly and fend off larger rivals.
Upscale jewelry store operator Tiffany & Co. (NYSE:TIF) closed out its fiscal year in fine fashion as sales and earnings grew in the double digits. Full year results were also strong, as are expectations for the coming year, and both reflect a continued recovery from the credit crisis. (For more details about the credit crisis, see Credit Crisis: Introduction.) Longer-term, organic growth trends to not quite justify where the stock is currently trading at.
The internet has revolutionized the world of retail stock investing by making vast amounts of financial information quickly and easily available to individual investors. And though still in the early stages, the advent of digital information exchange is also making it easier for more individuals to invest in privately-held companies. Just as eBay has put buyers in contact with sellers of collectibles that used to collect dust on attic shelves, today private companies are much more able to seek out buyers of their securities to allow them to raise capital.
Back in November, I recommended three Brazilian stocks I thought were worth owning at the time. Since then, two of the three are outperforming the Brazilian market, with energy giant Petrobras (NYSE: PBR [1]) up more than 20% to handily beat the iShares MSCI Brazil Index Fund (NYSE: ITW [2]), which is down about 4% in the same period.
Handbag and fashion accessories firm Vera Bradley (NYSE:VRA) focuses on selling merchandise that it categorizes as accessible fashion. This has helped the company develop a loyal following, but there is much growth potential as the company operates a very small domestic store base. Unfortunately, the stock valuation already reflects much of this growth potential.
Investing in the U.S. automotive industry is not for the faint-hearted. Given the well-documented woes of the auto industry, a buy-and-hold strategy would have proven disastrous during the past three decades. That’s why it’s important to closely follow and actively trade the stocks.
In January, I declared that Japanese companies had the most undervalued stocks in the world [1]. A calamitous magnitude 9.0 earthquake and subsequent tsunami have inflicted severe damage on the eastern part of the country, the most disastrous of which has been severe and potentially permanent damage to the Fukushima Daiichi nuclear power plant.
Investment research platform provider FactSet (NYSE:FDS) continued to see strong sales growth and impressive profitability during its second quarter. Unfortunately, the stock already reflects much of the current and future growth momentum in the underlying operations.
Large pharmaceutical companies are facing a crisis. The industry spent a record $65 billion on research and development (R&D) in 2009, but approval rates for new drugs have fallen 44% during the past decade and continue to drop. Also in 2009, drugs launched in the previous five years accounted for only 7% of all sales, meaning that older drugs closer to patent expiration make up the vast majority of sales. The failure rate of drugs in the final stages of development has doubled in recent years.
The 1950s are referred to as the Golden Age of Flight and a “Wall Street Journal” article recently described it as a time “when plane travel was glamorous, on-time, hassle-free and exciting.” Admittedly, this Golden Age was mostly romanticized as flights had much worse safety records and flying was reserved mostly for the wealthy. The industry was also heavily regulated.
Gaming supply firm Shuffle Master (Nasdaq:SHFL) used to be popular among growth investors, but was increasingly abandoned as its rapid growth slowed after 2006. The credit crisis further hit the share price, but sales remained relatively stable throughout and profits have come back markedly. A low valuation implies significant upside in the stock.
In the young men and women apparel niche, Buckle (NYSE:BKE) handily outperformed the competition during the fourth quarter. Consistent results during pushed the stock close to its highs over the past year, but it is still reasonably valued and could have further room to run.
AFC Enterprises (Nasdaq:AFCE) isn’t a household name, but it is working to build the brand awareness of the Popeyes chicken brand it owns and operates. Actually, the vast majority of stores are operated by outside franchisees, which leads to more lucrative franchise revenues that grew nicely during the company’s fourth quarter and full year. Ambitious growth plans if successful could push the share price higher going forward.
After an extended period of 50%-plus annual growth, China recently surpassed the United States as the largest car market in the world. This is just the tip of the iceberg, as only 2% of the Chinese population owns cars. In other words, the market has vast potential to grow significantly bigger.
Convenience store operator Casey’s General Stores (Nasdaq:CASY) reported third-quarter earnings on Monday that disappointed investors. The passing of takeover interest and a down overall market have also sent the shares on a downward trajectory, all of which have made them much more appealing to current and prospective investors.
Specialty apparel retailer Urban Outfitters (Nasdaq:URBN) closed out its year with another double-digit sales and profit increase, but investors focused instead on weaker than expected sales during the company’s fourth quarter. This likely represents a short-term blip as Urban’s future remains bright, but the stock could be dead money until short-term minded investors see that the recent fashion miss is truly temporary.
Posted: March 9, 2011 11:20AM by Ryan C. Fuhrmann
After years of wasteful government spending, battles are starting to brew at both the federal and state levels between those that want to make significant changes and others that are hopeful the issues will work out over time. A credit crisis and ensuing recession that have cut tax receipts significantly have served to exacerbate the problem, and it means at least a few rounds of belt tightening to improve things. Below are five of the most egregious examples of waste to come out of the government, many of which have been occurring for some time now. (For related reading, also take a look at Is The U.S. Census A Waste Of Money?)
Last week, leading pet retailer PetSmart (NYSE:PETM) posted a strong end to its fiscal year by reporting fourth-quarter profits ahead of analyst projections. The company has posted impressively consistent growth over the last decade that included solid results during a serious downturn and should continue to do so for the foreseeable future, though the stock price reflects a good amount of this growth already.
For better or for worse, many successful investments revolve around products or services that aren’t necessarily good for consumers. The best examples include products that aren’t very healthy: cigarettes, soda and junk food come to mind, as do gambling, pawn shops and credit cards.
Staples (NYSE:SPLS) is the largest office supply company in the world. It has found ways to survive and thrive in the face of online competitors such as Amazon (Nasdaq:AMZN), and deep-pocketed rivals including Wal-Mart (NYSE:WMT) and Costco (Nasdaq:COST) that also sell a wide array of office supplies. A retail, online and mail order delivery presence gives it a competitive edge, and its recent results demonstrated a continued recovery from the global recession.
In the recently released Berkshire Hathaway (NYSE:BRK.A, BRK.B) shareholder letter, Warren Buffett profiled a select handful of operating companies that not only reported earnings growth from the previous year, but also set records in terms of either sales or profit performance. The companies aren’t frequently mentioned by Buffett in his letters, so the latest letter offers unique insight into businesses and industries that he or his operating leaders have found worth owning. Below is an overview of the four record-breakers Buffett highlighted along with some publicly traded peers that coattail investors may find appealing. (To learn more about Warren Buffett’s investing style, see Warren Buffett: How He Does It.)
Membership warehouse chain Costco (Nasdaq:COST) posted very healthy sales and profit growth during its second quarter. International continues to post robust trends while the U.S. stores remain the healthiest in the membership retail space. The stock remains expensive on an earnings multiple basis, but there could be near-term profit pressures that could allow for a better entry point for prospective investors.
Warren Buffett, the famed value investor with an estimated net worth of $47 billion, on Feb. 26, released his annual letter to shareholders of Berkshire Hathaway (NYSE: BRK-B [1]), Buffett’s holding company and primary investment vehicle. The letter provided readers with the most up-to-date details of Berkshire’s common stock investment portfolio, along with the Oracle of Omaha’s trademark witticisms offering insight into his approach to investing.
Carter’s (NYSE:CRI) bills itself as a leading provider of apparel for babies and young children. It sells clothing under the Carter’s and OshKosh brands through its own retail stores and via outside department stores and big-box retailers. This sales breadth keeps it in front of consumers, and is a key reason its latest results saw a continued recovery from the latest recession. The coming year may prove disappointing from a profit perspective, but a low valuation and solid track record make the stock worth a closer look.
Back in 1999, an investor group including Warren Buffett’s Berkshire Hathaway helped Berkshire make its first foray into the energy business. The acquisition was of MidAmerican Energy Holdings Company, and the investor group included a gentleman by the name of David L. Sokol, MidAmerican’s CEO. In letters to shareholders, Buffett has since described Sokol as a “brilliant” and “terrific” manager who is “the enormously talented builder and operator of MidAmerican Energy.”
ICON plc (Nasdaq:ICLR) is one of the largest contract research organizations that pharmaceutical and biotech companies take advantage of to outsource key clinical trial and related drug development functions. The goal is to reduce costs and increase efficiencies. Outsourcing is a secular industry trend and Icon has grown rapidly in the past as a result. Unfortunately, right now Icon is struggling to realize that potential.
Apparel retailer Gap Inc (NYSE:GPS) closed out its fiscal year with its fourth consecutive year of double-digit earnings growth. The profit improvement has been impressive, but it has come without sales growth, and the coming year is currently projected to see the increase in earnings fall dramatically. International could bring sales out of the doldrums, but at the current pace it isn’t likely to make a meaningful impact on the overall company for some time.
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2013-05-22 16:00
