By Ryan FuhrmannPublished 08/31/2011 – 11:00
Since the end of the second quarter, the stock market has fallen fast and hard. The major market indexes, including the Dow Jones Industrial Average, S&P 500, and Nasdaq, are down more than 8%. This has wiped out gains for the year, though the Dow has recently rallied back to almost break-even.
Back in June, Pandora Media (NYSE:P) issued shares to the public for the first time. The stock is trading at close to half its highest price of $26 per share, which occurred shortly after the IPO. This may sound like a deal to some investors, but the company has quite a way to go to prove its business model will be successful, sustainable and profitable.
Lab testing firm Bio-Reference Labs (Nasdaq:BRLI) posted yet another quarter of impressive sales and earnings growth. Growth above 20% is nothing new to the firm and it is quick to point out that it is growing by internal means. In contrast, larger rivals have historically relied on acquisitions to expand. If future growth trends mirror past trends, the stock is a great value.
The market meltdown since the end of the second quarter has been unkind to the financial services industry. In particular, many money center banking giants have seen dramatic share price declines with Citigroup (NYSE:C) among the worst hit. Patient investors able to take an investment time line of at least five years could see their money double in the stock.
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Upscale jewelry retailer Tiffany (NYSE:TIF) boasted in the headline of its quarterly earnings release that it reported “substantially higher-than-expected sales and earnings growth” in its second quarter. Sales and profit growth were indeed impressive at 30% but are likely well above the levels that Tiffany is likely to post over the long haul. At Tiffany’s current earnings valuation, a rival high-end retailer may have more investment appeal. (For more, read Earnings: Quality Means Everything.)
HJ Heinz (NYSE:HNZ) reported impressive first quarter sales growth, though profits were hampered by higher commodity and operating costs. Heinz still expects to report high single-digit growth for the full year, which speaks to its operating stability and predictability. This reliability is reflected in its above-average earnings valuation, but may still appeal to more conservative, income-minded investors.
Medical device giant Medtronic (NYSE:MDT) has a corporate mission to help alleviate pain, restore health and extend life for millions of patients around the world. The company is increasingly targeting international markets for growth, and a lineup of new products could push sales growth back up into the double digits. Sales and profits have also grown steadily through the recent economic downturn, and its first quarter proved to be no exception.
Jack Henry & Associates (Nasdaq:JKHY) helps smaller banks perform mundane tasks, such as handling financial transactions through an array of software products and service support. One would think Jack Henry’s business would be struggling in the face of volatile financial industry trends, but sales and profits continue to move steadily forward.
By Ryan FuhrmannPublished 08/23/2011 – 09:00
Editor’s note: As has been widely reported, Warren Buffett this morning (August 25) announced plans to invest $5 billion in Bank of America (NYSE: BAC [1]). According to reports, Buffett will buy 50,000 preferred shares [2] paying a 6% annual dividend [3]. This development, along with the recent move to purchase more shares [4] of Wells Fargo (WFC: NYSE [5]), as detailed by Ryan Fuhrmann below, illustrates Buffett’s contrarian [6] bent, as financials led the market lower in the most recent market downturn. Bank of America led the pack, losing about 38% since July 22. Financials have been roundly spurned since Lehman Brothers collapsed in 2008, yet Buffett seems to be sending clear signals that despite some strong headwinds for the financial industry, he thinks there are significant deals to be had.
Office supply retailer and delivery giant Staples (Nasdaq:SPLS) reported second quarter earnings on Wednesday that demonstrated the economy may not be on dire footing. Office supplies are seen as a solid indicator of underlying business trends, and Staple’s delivery and retail arms in North American are doing quite well. International remains another story, but an improvement overseas could help push the stock forward. (To learn more about retail stocks, check out Analyzing Retail Stocks.)
Food distribution giant Sysco Corp (NYSE:SYY) first went public in 1970, and reported $115 million in sales. It just closed out its fiscal year with $39.3 billion in sales and serves 400,000 customers. This impressive growth trajectory has stalled out since the credit crisis and has also become tougher as Sysco’s market share is quite large at nearly 20%. However, the company is working to stabilize its core business and could return to pursuing large acquisitions to boost market share and total growth going forward.
Home improvement retailing giant Home Depot (NYSE:HD) reported second quarter earnings on Tuesday that came in ahead of analyst projections. Sales growth was also decent, though its full-year guidance continues to reflect a weak recovery since the housing bubble deflated. Home Depot’s stock will likely tread water until the sales climate improves. In the meantime, a larger retailing peer looks more appealing at current share price levels.
Home improvement giant Lowe’s (NYSE:LOW) is no longer seeing sales plummet from the bursting of the housing bubble, but they continue to track below what management would prefer. Cost controls should continue to support profit expansion, but Lowe’s share price will likely remain stuck in neutral until the top line picture improves. At the current stock price, a couple of big-box peers look more interesting in terms of investment appeal. (For more on retail stocks, check out Analyzing Retail Stocks.)
Progressive Corp. (NYSE:PGR) is officially a general property and casualty (P&C) insurer, but its fortunes are driven mainly by providing auto insurance to individuals throughout the United States. It has gained market share in recent years by selling directly to consumers, which avoids having to pay an insurance agent a commission. This combined with consistency in its operations and a recent stock price decline make the stock worth a good, close look.
By BOB O’BRIEN
Any income-seeking investor who wants to turn a pedestrian 1% dividend yield into a lip-smacking 8% return need only say the magic word: Presto.
Specifically, National Presto Industries (ticker: NPK), a maker of heavy-duty kitchen appliances. Do you have a pressure cooker, a deep fryer or a popcorn popper? There’s a good chance that they are made by National Presto.
…..This year, the special dividend – announced in February – amounted to … get ready … $7.25. Lard in the dollar-a-year in regular cash dividends, and, in National Presto, you’ve got a company throwing off a yield of 8% a year. That’s the kind of payout you’d expect from a commercial property real-estate investment trust or a utility.
“Look, I’m not going to argue that it’s an overly exciting company,” says Ryan Fuhrmann, a value investor and money manager who writes on investing for several notable financial Websites. “But it pays out almost all its earnings in the form of a dividend.”
Fashion specialty retailer Nordstrom (NYSE:JWN) reported second quarter results last week that came in ahead of analyst projections. It also raised its guidance for the full year. Overall stock market turbulence likely kept the shares from rallying, which leaves them at a decent valuation level for prospective investors.
MGM Resorts (NYSE:MGM) reported second quarter financial results on Monday that demonstrated its casinos are slowly recovering from the credit crisis. A more aggressive move into Asia is also helping its forward prospects, but they may remain limited given the firm’s heavy debt load.
Macquarie Infrastructure Company (NYSE:MIC) owns and operates a small handful of infrastructure assets in the U.S. This asset base is costly to run and maintain, but consists of relatively basic services whose cash flows are predictable. This, combined with an appealing valuation and potential to reward investors with an increased dividend make the stock worth a close look.
Recent weather and stock market trends have not been kind to the share price of lawn and garden care company Scotts Miracle-Gro (NYSE:SMG). Customer concentration also dented second quarter profitability, though this shouldn’t be a long-term concern. Despite the nearer-term challenges, many of the firm’s brands remain market leaders and they have visible shelf space among the largest big-box retailers in the U.S.
By Ryan FuhrmannPublished 08/09/2011 – 09:00
In the book Spin-off to Pay-off, author Joseph Cornell cites a number of reasons why corporate spinoffs are ideal for finding highly compelling investment opportunities. And with companies struggling to grow in the current market environment, the timing is proving ideal for spinoffs because they represent a great way to enhance shareholder value.
Pharmacy services firm CVS (NYSE:CVS) reported a slight fall in second quarter earnings last Thursday, but did beat analyst projections by a penny. Sales grew at a much faster pace, but the growth track record since acquiring a complementary industry rival back in 2007 has so far failed to live up to expectations. The merger of two archenemies could also make future growth more challenging.
The overall stock market is now down so far in 2011, but coffeehouse chain Caribou Coffee (Nasdaq:CBOU) has seen its shares rally nearly 50% during this period. This impressive run has pushed the earnings multiple up substantially, but the firm is still worth a look if management soon begins delivering on its ambitious earnings growth projections. (For more on the effect earnings has on share prices, check out Earnings Power Drives Stocks.)
Consumer products firm Clorox (NYSE:CLX) reported full year results on Wednesday that illustrated it continues to struggle with growing sales in a weak global economy. Additionally, higher raw material costs are denting profit growth. Yet despite these headwinds, shareholders continue to do quite well, with further upside contingent on Clorox being bought out by a shareholder activist or archrival. (For help investing in consumer products, check out A Guide To Investing In Consumer Staples.)
Posted: August 8, 2011 9:10AM by Ryan C. Fuhrmann , CFA
With an estimated net worth of $80 billion, Warren Buffett recently qualified as the third wealthiest individual in the world. This wealth was created through an investment philosophy that appears relatively straightforward at first glance. In its basic form, it consists of investing in a successful company at a reasonable price and with the mindset that the position will be held forever. (For more on Warren Buffett, Warren Buffett: How He Does It.)
J2 Global Communications (Nasdaq:JCOM) reported impressive second quarter financial results on Tuesday after the market close. Its stock jumped nearly 12% following a day when the market fell more than 2% and may have more room to run as the earnings multiple remains reasonable and growth trends appear to be perking up.
Posted: August 5, 2011 9:11AM by Ryan C. Fuhrmann , CFA
The buzz over social media companies continues to grow and the leading players in the space are now more valuable than a large number of publicly-traded companies that have been around for many years. This is surprising many investors given the fact that many social media firms having existed for less than a decade and possess business models that are still evolving and far from posting consistent profitability.
Industrial firm Graco (NYSE:GGG) bills itself as one of the worldwide leaders in fluid handling. This consists of handling the movement, measurement and control of fluids for industrial uses. Given its end clients operating in cyclically sensitive businesses, Graco’s prospects dimmed during the financial crisis. Its operations are largely back on track, with a major acquisition set to be completed soon. Despite these investment positives, for a couple of reasons cited below, investors may consider waiting on the sidelines.
Posted: August 3, 2011 9:20AM by Ryan C. Fuhrmann , CFA
The digital age has had a profound impact on global financial markets. Most of the impacts have been advantageous for investors and include the fact that investment information has become readily available and literally right at investor fingertips. This has leveled the investment playing field, with individual investors benefiting as the industry is no longer controlled by a small handful of large banking, brokerage and advisory institutions. Digital information has even revolutionized trading itself as exchange floors are run increasingly by computers, as opposed to physical traders through an open outcry system. (Buying stocks is a careful balance of risk and reward. Learn to identify your risk tolerance and financial goals with these fundamental points. See 4 Key Factors To Building A Profitable Portfolio.)
In industrial conglomerate ITT Corp’s (NYSE:ITT) opinion, the market is not realizing the value of its disparate operations. As a result, it has decided to split into three different firms in a transformation that it hopes to complete by the end of 2011. Its second quarter financial results continued to demonstrate they are growing strongly as a group, and their potential a standalone firms could be even stronger. Plus, there will be takeover potential once the new firms start to trade on their own.
Neustar (NYSE:NSR) was founded in 1998 to address regulations in the telecom industry resulting from the 1996 Telecommunications Act. A major change concerned number portability, and Neustar has evolved into the effective clearinghouse for the industry. It reported second quarter results that showed sales continue to grow robustly, and though profit growth was subdued, the firm sported impressive profit margins that should grow around 20% for the full year.
Defense giant Lockheed Martin (NYSE:LMT) reported second quarter earnings on Tuesday that demonstrated it is doing just fine in a climate of reduced defense spending. Despite tougher sales trends, it is finding ways to boost profitability and this trend should continue going forward.
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