Archive for the ‘Stocks’ Category

What to do with Wal-Mart stock? WMT buy or sell?

Friday, July 13th, 2007

Question:

I’m not an experienced stock trader by any means, but I do follow the markets somewhat. Just want to get some input from those in the know. About 10 or so years ago my father in law bought my wife 100 shares of WalMart at around $50 as an investment. The stock has languished since then – it’s been stuck in the mid-to-high 40s for as long as I can remember. It’s at 48.82 as of 2:43 pm today.

Analysts have long looked down upon its practice of building stores too close to each other and thus cannibalizing each other’s sales, leading to a decline in sales growth in existing stores. In addition, they’ve had to pull out of a few foreign markets for lackluster sales. And there’s the issue of WalMart getting a lot of bad press because of the union and health care issues.

We basically don’t take this stock into account in our financial planning, so I’m thinking that I wouldn’t mind being a little bit risky in trying to take that money out of a languishing stock and making it grow.

Does anyone in the know foresee a turnaround for WalMart stock? Or should I bail and park the money in something like biotech, or in a commercial REIT?

Unprofessional advice:

1. If you’re satisfied with you less than 2% dividend yield then hold on. If not, sell it and gamble on a stock that might grow (or not) or put it into a CD for 5%. Or you can sell it and go to Vegas. I am not a financial advisor, but there is no way anybody here can advise you without doing a review of your financial picture. I would discuss it with a broker or financial planner.

2. The stock has done nothing to warrant any loyalty. It has been underperforming the market since 2002, and underperforming its peers since 2003. The bottom line is all that counts, so sell it and buy something better.

3. I would have sold it a long ago. When a mass retailer gets that big… and has a giant target painted on them from every direction…. imo it’s time to look elswhere.

4. I sold it a while back. It’s actually down from about $67 in 2000. Wish I had dumped it all then. You’ve got a stock that will give you a small capital loss if you sell, and a dividend well below what a money market account would provide. It’s PE is well below what it was in 2000, but the market doesn’t want to value it higher.

I’d beware of REITS given the current real estate woes, but it seems to make sense for you to sell the WMT. It might be worth parking it in a MMF until you get clear signals that real estate is turning back around and then buying a REIT.

5. Short term, it’s a pig. Long term could be very different. Wal-Mart has screwed the pooch recently with their merchadise selections, forgetting who their real customer is. That screw up will be rectified. They have also bailed out of some unprofitable grocery store activities in Europe.

On the other side of the coin, they have the lowest cost, most efficient distribution model in the retail business along with the economies of massive scale and a corporate culture that values hard work and thrift in operating the business.

They have the grocery industry sh!tt!ing in their drawers from coast to coast.

They are getting into banking for their legions of customers who are underserved or not served at all by traditional banks.

Sooner or later the socialists and the unions will realize that they can’t drive Wal-Mart out of business.

And unlike their near-disaster in Europe, their Asian expansion seems to be going very well.

This is a powerhouse operation going through some relatively down times.

It’s tough to make any money churning stocks, but there are times when you just have to say “enough is enough.” Bottom line is that it depends on your patience and tolerance. They could be a high flyer again somewhere down the pike.

6. I just sold mine 2 weeks ago. With only 100 shares, upside is limited. There are many options available– ie one of the energy ETFs, or EMC, a data storage play about to spin off a very hot property, VMWare. Its selling over 19 now, upside range to 25 with the spin off; fundamentals also look good for a longer term investment. Many, many choices for you.

Anyway, I like EMC because of their RSA acquisition, and VMWare’s positioning in the whole server-virtualization market that’s red hot right now, means they’re poised to make a run.

Some will argue it’s too late for EMC. Two months ago, when it was 13-14 would have been the right time.

7. I seriously reccommend investing it all (and more if you have) in SPY or QQQQ….If your not familiar with investing, all they are, are microcosms of the market itself. The SPY is a microcosm of the S&P 500 (Top 500 Stocks) its basically a veryyyyyyyyyyyy small slice of each piled into this one stock the moves with the market….and if your familiar with the market, it avg about 12% increase per year….from last june to this past june, it made 21% so that approx. how much you would have made had you owned this ETF (exchange traded fund its called, but its basically a stock)….The QQQQ is the same thing about 1/3 of the price and is a microcosm of the Down Jones Industrial (again 30 top, blue chip stocks). These are both safe slow upward moving investments you wont have to worry about. GL with your investing.

8. I read a nice article on Garmin GRMN back in Feb saying that GPS was going to be in everything. Bought some at $49. Bought some more a couple weeks ago a $69. It hit $82 today. This stock could be going for a while.

I hate the WalMart stock and have hated it for years. Their low cost model works because they can generate enormous inventory turnover in their big box stores but that only works if they are not cannibalizing their stores. With today’s excess retail space, WalMart is moving to 150,000 sq foot stores which are even more dependent on foot traffic. Personally, and I’m not advocating that you sell, but I believe those bigger stores will ultimately lead to diseconomies of scale as they won’t be able to drive enough traffic through those stores to cover their fixed overhead.

WalMart made the mistake of trying to be a growth stock after their lifecycle passed them by. Opening up new stores is fine when you’re the only game in town, but they are going up against other retailers that have spent years learning how to combat WalMart.

If consumer spending turns down like I expect, WalMart will get crushed by their fixed overhead.

9. I’d sell. This is a company that’s too big to growm much. So either it’s a value play or it’s a sell. The PE is relatively low, and they may have some valuable real estate so you might consider it as a value play. Frankly I don’t bother with that kind of research so I have no idea if its real estate is under valued according to the stock price.

What to do with the money is another question and I’m not sure you sad how many shares we’re talking about. A commercial REIT sounds like a fine idea especially if you need it to diversify. I like having some REITs, precious metals, and other stocks that don’t normally follow the broader market…

Are stocks like China Telecom going to keep up their big gains?

Monday, June 25th, 2007

In late January 2006 I sold China Telecom when it was arount 38 because a Standard & Poors report talked of significant risk. Now it’s around 62.

I replaced CHA with Ebay, which has gone up around 15% for me. But still, I couldn’t help wondering if I’d overreacted to the S&P report.

I think it’s still risky. Here’s an article comparing modern China to the tech bubble that cause a poor college student / amateur investor many sleepless nights.

Perhaps this article on emerging market ETFs will give me some direction. Many include stocks in Brazil, South Korea, and China. I want some of each please.

How to close a TD Ameritrade acocunt without paying a fee?

Wednesday, June 13th, 2007

Someone recently asked the following question:

Could use some help with the company. TD Ameritrade took over Waterhouse and customer service has gone in the toilet. When I called about transferring accounts to another firm, they said there’s a $75 closure fee per account and we have about 5 accounts. Does anyone know how to avoid the fees? I can’t get information from the company and every time I call them, there’s a 1/2 hour wait to talk. Does anyone known what to do?

One of my friends said he worked for Ameritrade for 3 years prior to leaving to go to Citi, service used to be good but in order to meet their synergy numbers for the street they laid off a ton of people, mostly those in the call centers in Omaha and Ft. Worth Not sure how to avoid the fee, what you can do is ask the firm you are transferring the accounts to for credits or fee waivers to off set those, most firms do this.

I thought this was an interesting one because I started with TD Waterhouse and left for Ameritrade because of crappy customer service plus a technical problem with their website that messed up one of my trades. So I thought it was funny when the company I left was bought by the company I joined. Now the company I joined is becoming the company I left…

Open skies accord = opportunity for Ryanair and Boeing

Wednesday, May 2nd, 2007

I’ve written before about airline stocks and how outside of index funds I currently don’t own any. I think some like JAL and Korean Air are potentially good investments but even my favorites in the industry carry some risk.

Korean Air gets much higher prices than other airlines since many Koreans are willing to pay more for the service and since once the few less expensive carriers are sold out, Korean travelers have nowhere else to go. They have a good niche; if you want to fly direct from New York to Seoul, you have 2 choices. Korean Air and Asiana.

I don’t know how JAL does it, but they have the best prices and the best service on the New York to Seoul flight. Flight attendants have told me that the flights from Tokyo to New York and then New York to Sao Paolo, Brazil are noramlly full. Full planes ought to indicate good business…

Anyway, this article indicates a major change coming to the airline industry as restrictions on flights between America and Europe will be removed. This should result in lower fares and more competition. But it also means new opportunities for some airlines.

I suspect the big winner here will by Ryanair if they are able to add low-cost transatlantic flights. I can’t imagine these not being extremely popular.

It also looks like Boeing will continue outperforming Airbus thanks the the 787 Dreamliner which is expected to see increased demand due to the new America – Europe routes.

The right move for GE

Saturday, April 28th, 2007

Peter Lynch wrote that once companies reach a certain size, their stock has very limited potential. A company like GE simply can’t double their earnings so how can the stock price double?

Here’s an interesting article on GE, a pretty boring stock that hasn’t done much in recent memory. The article recommends spinoffs and I think that’s the way to go – they often create immediate shareholder value.

For example I remember when Eaton (ETN) spun off Axcelis Technologies (ACLS). Eaton shares stayed the same and ACLS were gravy. I don’t see why the same couldn’t happen if GE spun off its real estate or finance parts.

newspapers being acquired by real estate moguls

Sunday, April 15th, 2007

I thought this was an interesting look at the recent acquisitions of newspapers led by real estate moguls. Interestingly, these seem to be fairly low-risk deals:

Zell is gaining effective control of Tribune in a complex deal that calls for him to inject only $315 million of his own money. By converting it to employee stock ownership, the company also will no longer be subject to corporate income taxes that now total hundreds of millions of dollars annually, making it easier to pay off $5 billion in new debt.

With all the talk about newspaper stocks, I want to take another look at Washington Post stock.

5 star ratings from Mornginstar and held by Berkshire Hathaway

Wednesday, April 11th, 2007

I wrote this one a while ago and forgot to publish it. Maybe it’s not finished but this is all it will ever be…

Here’s an interesting article that summarizes stocks being bought and sold by Warren Buffet’s Berkshire Hathaway. They go into a little detail on 5 that Berkshire hathaway likes and that Morning Star rates 5 stars. These are:

American Express (NYSE:AXP)
Johnson & Johnson (NYSE:JNJ)
United Parcel Service (NYSE:UPS)
Wal-Mart (NYSE:WMT)
Western Union (NYSE:WU)
White Mountains Insurance (NYSE:WTM)

I’m most interested in WTM and AXP for further research but for now I don’t own any of these directly. I do have about half my stock money in the S&P 500 index however…

Starbucks stock (SBUX) and the CEO’s memo

Sunday, February 25th, 2007

Howard Schultz, the Starbucks chairman, hurt his own company’s stock with a memo about Starbucks losing its way. There’s no doubt that Starbucks is no longer unique but that’s the normal progression of things.

According to Seth Godin’s Purple Cow reasoning. When you create something original and it becomes popular (and Starbucks started off as basically the only place to go for fancy coffee) you then cash in. By cashing in you make it less original. But you make more money and making money is something the unoriginal Starbucks has been very good at doing.

Perhaps that’s why David Gardner recommends SBUX:

First mover: A head start that might be insurmountable.
Best in big market: A top dog in a red-hot industry.
No escape: A brand worming its way into our culture.
Killer product: A product that blows away all rivals.
These four should more than get you started. And naturally, there will be some overlap among them, but any company demonstrating even one of these traits is worth digging into. For now, take a hard look at these classic Rule Breakers.

Electronic Arts
Federal Express
Starbucks (if you don’t already own it).

If you’re looking for a more speculative play, consider Akamai in the Net space or PDL Biopharma in biotech. And, by all means, keep an eye on the new direction and turnaround at TiVo. All three face challenges ahead but all could still prove to be speculative Rule Breakers.

Akamai
PDL Biopharma
ISRG

I don’t own Starbucks. Perhaps I should; the CEOs worries seem pointless to me.

UNAM and other lesser known stocks

Thursday, February 22nd, 2007

Motley Fool recently wrote about 4 stocks that Wall Street mostly or entirely ignores:

Healthstream (Nasdaq: HSTM)
National Research (Nasdaq: NRCI)
MoSys (Nasdaq: MOSY)
Unico American (Nasdaq: UNAM)

These meet 1 of Peter Lynch’s criteria in that they are still ‘under the radar’. If Wall Street analysts paid more attention to these stocks you would see higher valuations making them more likely to be good value picks now. That’s not to say that no one owns these stocks. Take a look at the major holders of UNAM for instance.

Anyway, just a few ideas for you to look into. Remember to do your research. The Peter Lynch criteria that isn’t being met (at least by me) is that when you buy a stock you’re supposed to know something about what the company does and why it will succeeed.

JetBlue Airways stock (JBLU) and cancelled flights

Sunday, February 18th, 2007

It will be interesting to see what happens to JBLU next week and longer term in light of the recent problems. You can read some comments on my travel blog; one person says we should start suing. Another says they will never fly JetBlue because of an expensive flight to Australia.

There’s a good article from the Daily News about the writer’s JetBlue experience. The writer tries to capture what has been making JetBlue successful and what they might have lost.