In early 2008, falling home prices and a declining stock market caused consumer spending to plummet. This lasted for about 18 months. But soon consumers started to realize that the economy wasn’t going to remain in freefall forever. Today, the retailing industry has recovered quickly, is on much more solid footing, and certain players are set for a big move forward in terms of sales and earnings.
Upscale jewelry store retailer Tiffany & Co. (NYSE:TIF) reported impressive first quarter results last week as sales jumped 20% and profits advanced 26%. At the current valuation, the market expects these growth levels to continue for many years to come, but it may only get half these levels, based on Tiffany’s past track record.
AFC Enterprises Inc. (Nasdaq:AFCE) operates the Popeyes restaurant concept and bills itself as the “second-largest quick-service chicken concept based on number of units.” A focus on franchising the majority of its stores means high margins for the parent company, and management has ambitions to ramp up new store growth going forward. At the current share price, this growth will be needed to justify the current earnings multiple.
Bank of Montreal (NYSE:BMO) is one of Canada’s largest financial institutions. A focus on its home country served it well during the credit crisis, but like most large banks it is struggling to grow organically. The banks second-quarter profit results came in better than expected and it sports an appealingly high dividend yield, but investors are waiting for a couple of recent acquisitions to boost its growth outlook.
Posted: May 27, 2011 1:37PM by Ryan C. Fuhrmann, CFA
Warren Buffett and Donald Trump are two of the most famous and successful businessman in both the United States and the world. Both are billionaires and share many similarities, including business acumen, power and celebrity. Both also have nicknames, with Buffett known as the Sage/Oracle of Omaha and Trump simply known as the Donald. But overall, their rise to the top has come from different avenues, with Buffett steadily accumulating wealth over decades and Trump preferring to capitalize on his boldness and celebrity to strike it rich. Below is a more detailed comparison of these two business moguls.
According to recent figures, U.S. companies hold an astounding $1 trillion in overseas bank accounts. The reason for holding this ungodly amount of money overseas? Because bringing the cash back to the United States would require a rather significant tax hit.
So what are these companies doing with all this cash? Well, up until recently, not a lot. But that’s beginning to change and it’s one reason why individual investors should pay very close attention to this phenomenon…
Membership warehouse and big-box retailer Costco (Nasdaq:COST) disappointed investors with weak profit growth during its fiscal third quarter. The company is still on track to match the historical growth it has posted for more than a decade, but this growth is insufficient to justify the current share price valuation. As a result, a couple of big-box retailers currently have more appealing investment appeal.
Brazilian energy giant Petrobras (NYSE:PBR) has vast potential to produce oil and gas in an area off the coast of Brazil that is known as the pre-salt region. If it delivers on its ambitious growth targets during the next decade, Petrobras will likely become the largest public energy firm in the world. Below are further details on its expansion plans and what this could mean for investors.
After a decent run of above-average-industry growth and healthy profit gains, home-style food and shopping operator Cracker Barrel (Nasdaq:CBRL) released third quarter earnings to suggest it is slowing down a bit. Sales came in below management’s own expectations and profits disappointed analysts, and while the stock fell quite a bit after results were released, a number of competitors look more appetizing at current levels.
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Bill Gates founded Microsoft (Nasdaq: MSFT [1]) in 1975 and for a time was the wealthiest person on the planet, thanks to the company’s ubiquitous Windows operating system. In June 2008, Gates gave up his day-to-day role at Microsoft to spend more time working with his wife at the Bill & Melinda Gates Foundation. Mexican businessman Carlos Slim has since taken the title as the world’s richest person, while Gates has shifted focus to his philanthropic efforts.
PetSmart (Nasdaq:PETM) and privately held Petco rule the space for big-box retailing of pet products and services. PetSmart reported impressive first-quarter results last week and continues to grow steadily, but the current share price doesn’t properly account for how fast this company is growing or how the intense competitive landscape is.
Office supply firm Staples (Nasdaq:SPLS) surprised investors on Wednesday with weak first quarter results. As a result, management lowered its full-year expectations and investors lowered the stock priced significantly. But at current levels, the risk/reward in terms of investment appeal has become much more interesting.
Retail behemoth Wal-Mart (NYSE:WMT) reported another quarter of modest domestic growth and strong international expansion in 2011. The bright spot was Sam’s Club, though it has a minimal impact on total firm profitability. Over the long haul, Wal-Mart represents one of the safest bets in retail and has appeal to conservative, income-minded investors. (For more on retail stocks, check out Analyzing Retail Stocks.)
By Ryan FuhrmannPublished 05/18/2011 – 11:00
Berkshire Hathaway (NYSE: BRK-A [1]) (NYSE: BRK-B [2]) released its latest 13-F filing with the Securities and Exchange Commission (SEC) [3] on Monday, May 16, to detail its stock portfolio holdings as of the end of the first quarter. The release is highly-anticipated each quarter and, though the first quarter ended more than six weeks ago, it offers the timeliest way to see which stocks Warren Buffett bought, sold or held during the 12-week period.
Off-price retailer TJX Companies (NYSE:TJX) missed profit expectations when it reported its fiscal first-quarter profits on Tuesday. The market sent its shares down as a result. Unfortunately, a better look at the company’s books suggest the market still isn’t giving the company enough credit for its consistent results throughout nearly any economic environment. Fortunately, this could mean good opportunities for potential investors. (For background reading on investing in this sector, see The 4 R’s Of Retail Investing.)
Upscale department store retailer Nordstrom (NYSE:JWN) reported first quarter profits on Thursday that came in ahead of analyst projections. An acquisition to move into the online fad for daily fashion deals is denting near-term profitability, but should contribute positively to sales as the firm continues to expand its store base across the U.S.
By Ryan FuhrmannPublished 05/16/2011 – 11:00
In Omaha during Berkshire Hathaway’s (NYSE: BRK-B [1]) annual shareholder meeting, Tom Gaynor, chief investment officer of Markel Corp. (NYSE: MKL [2]), detailed an asset class [3] he follows — SID — which stands for “stocks in drag.” This was meant to highlight that certain “safer” securities may not actually be that safe and instead will demonstrate price volatility similar to stocks.
By Ryan FuhrmannPublished 05/13/2011 – 11:00
With the maturity of the automotive industry in developed markets, the real growth potential lies primarily in emerging markets [1]. Emerging markets account for close to 40% of the global market and were recently estimated to have produced 30 million vehicles. By most measures, China is already the largest automotive market in the world and accounts for an estimated 20% of global assembly in emerging markets.
Posted: May 13, 2011 8:37AM by Ryan C. Fuhrmann, CFA
Investing legend Peter Lynch was fond of recommending that investors buy what they know, to make money on stocks. This included finding popular stores at the local mall and finding out if the company had a stock that traded on the stock market. His strategy worked out extremely well for investors in his Fidelity Magellan fund, and his philosophy of investing close to home still works to this day. Below is a current retail portfolio of major store chains that can be found across malls in America. (For additional reading, also see Biggest Shopping Trends For 2011.)
Department-store operator Macy’s (NYSE:M) continued to impress investors with another strong quarterly financial report. Sales grew solidly at its existing store base while online sales and profits grew rapidly. This momentum is projected to continue for the rest of the year, and although prospects beyond this year are less certain, there is still room for upside in both the store trends and common shares. (For more on retail stocks, check out Analyzing Retail Stocks.)
Rocky Mountain Chocolate Factory (Nasdaq:RMCF) operates a growing number of confectionary stores across the U.S. and a small handful of international locations. It closed out its fiscal year on a high note, with profits growing for the first time since the credit-fueled global recession started three years ago. Its business model is quite lucrative and expansion prospects are robust; unfortunately, the current earnings valuation is unappetizing. Let’s take at whether this stock can hit a sweet spot once again.
Posted: May 11, 2011 9:54AM by Ryan C. Fuhrmann, CFA
Over the past five years, stock market returns have been close to flat, but gold has returned more than 120%. The return disparity is also visible over the past 12 months, as gold has returned approximately 35%, while the stock market is up only about 12.5%. So far in 2011, the gap has narrowed, but gold is up 10% while the S&P 500 has returned just over 8%.
PetMed Express (Nasdaq:PETS) sells pet medications and related health products online and through a 1-800 number. Online sales make up close to 70% of sales and appear to be struggling in the face of intense competition in cyberspace. PetMed is being forced to ramp up advertising and lower prices to compete with larger online rivals and may struggle to remain competitive on its own. (Shopping from the comfort of your couch has major benefits and some unpleasant side effects. For more, see Shopping Online: Convenience, Bargains And A Few Scams.)
Credit card provider MasterCard (NYSE:MA) reported third quarter earnings last week to demonstrate that its global growth potential remains far from running out of steam. The share price valuation already discounts much of this growth, but its prospects remain more robust than its archrival.
Consumer products firm Clorox (NYSE:CLX) reported third quarter earnings last week that saw sales eke out modest growth, but profits took a hit from rising commodity costs. Management still projects full-year earnings growth, but a recent run in the share price makes a number of rivals more appealing investment candidates.
Posted: May 9, 2011 8:43AM by Ryan C. Fuhrmann, CFA
Since its introduction in 1995, The global market for online gambling has grown rapidly, bringing in more than $25 billion in revenue in 2009. It was estimated to reach nearly $30 billion, before U.S. authorities announced a major crackdown of online poker by seizing five major gambling websites and indicting 11 individuals involved with the sites, on April 15, 2011. (To learn how investing can be like gambling, read Going All-In: Comparing Investing And Gambling.)
Caribou Coffee Company (NYSE:CBOU) reported solid first quarter results on Thursday, and profits ahead of analyst expectations. Management expects it to report sales north of $300 million for the full year to indicate it is a small chain, but it has solid growth potential and ambitions to grow earnings at a rapid 25% annual clip over the long haul.
j2 Global Communications (Nasdaq:JCOM) makes its money from selling subscriptions to use its fax, voice and email capabilities under the eFax, eVoice and Electric Mail brand names. It reported first-quarter results on Thursday to demonstrate that growth trends are picking up, after what proved to be a temporary slow down during the latest recession. The firm has an appealing business model and share valuation, meaning the stock is worth a close look. (For more, see Equity Valuation In Good Times And Bad.)
Kellogg (NYSE:K) bills itself as the “world’s leading producer of cereal and a leading producer of convenience foods, including cookies, crackers, toaster pastries, cereal bars, fruit-flavored snacks, frozen waffles and veggie foods” Like most food companies, it operates in a wide array of product categories. The company is currently facing headwinds from high commodity costs, which dented first-quarter profits, but sales came in higher than expected. Over the long haul, the company should continue to leverage moderate sales growth into much higher profit expansion, and a decent dividend yield should push total potential investor returns to appealing levels. (For related reading, check out Why Food Is Still Cheap In America.)
Posted: May 6, 2011 11:46AM by Ryan C. Fuhrmann
He’s one of the most famous investors of all time and has certainly earned his nickname of “The Oracle of Omaha”. Warren Buffett has long been hailed as a value investor. But is that statement still accurate?
By Ryan FuhrmannPublished 05/02/2011 – 15:00
The Berkshire Hathaway (NYSE: BRK-A [1]) (NYSE: BRK-B [2]) shareholder meeting takes place each year during the first weekend in May in Omaha, Neb. The 2010 meeting, held this past weekend, was attended by an estimated 40,000 loyal shareholders, many of which have held shares [3] of Berkshire for decades and have become wealthy due to Warren Buffett’s ability to grow money at one of the most rapid rates in history.
By Ryan FuhrmannPublished 05/04/2011 – 11:00
In a Rolling Stone article from April 2010, in a now famous tirade against Wall Street investment banks, journalist Matt Taibbi described Goldman Sachs (NYSE: GS [1]) as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” This is one of the more negative descriptions of the industry you’re likely to find, but it does illustrate the hostility that people in the press and others still have toward investment banks and the role they played in causing the credit crisis.
Airline operator Delta Air Lines (NYSE:DAL) reported a first quarter loss on Tuesday due to a jump in fuel costs. Sales were also hit by severe winter weather and the natural disasters in Japan, but still rose in the double digits. Investors remain rightfully worried about near-term fuel costs, but several factors suggest Delta is entering a period of consistent and sustainable profit generation.
Higher commodity costs dented the profits of consumer products giant Procter & Gamble (NYSE:PG) during its third quarter, but sales growth was solid and broad based across its divisions. Historical trends support that fact that P&G is the most disciplined player in the industry and should be able to offer investors over 10% annual total returns over the longer haul.
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