The stock market is on a roll with the Nasdaq leading the way, up
over 20% in the last three months. Will it continue? Hard to believe
it stays on the current path, probably a few setbacks here or there.
Still, with bond yields where they are, it will take many years of 2 and
3% interest rates payments to match what you got in the last three
months in the equity markets. Yes, there is risk of loss, but you
already have big gains in a relatively short time frame.
Turnarounds
are always available in the stock market, as there are always companies
whose performance lags and has a very low stock price. Does that mean
they will make great investments? Not always, but it is certainly an
area to consider when investing. A few classic turnarounds over the
last few years would be McDonalds and Starbucks. Ronald McDonald at one
point was down to 12 bucks a share, and the big green machine was at 8
bucks a share only three years ago. Both have come roaring back and are
stronger than ever. Last year, Sears stock price was down over 80%.
In fairness, it is currently up 110% for this year, but I don't think it
is a great turnaround story.
Competing with Wal-mart, Target, Costco,
Hope Depot, and Lowe's, among others, is a really rough market. So what
other candidates are out there that look interesting?
The three
that come to mind would be HP, Best Buy, and RIMM (Research In Motion).
Full Disclosure: (Yale Bock and Y H & C Investments own HP and Best
Buy for clients and for himself). HP and Best Buy are market leaders
with businesses that generate large amounts of cash and have pretty
strong balance sheets. HP is the current market leader of printer
cartridges, and has actually expanded share over the last year. The
problem there is in their software, consulting, and hardware offerings.
With Best Buy, they have no debt and lots of cash and growth has
slowed, along with a few too many big box stores. Both are very
fixable, especially Best Buy, which should just shut down the non
performing locations. Time will tell as to how these perform but in the
meantime, you get paid dividends so time is on your side. RIMM is
tough because their products relative to Apple and Google are inferior.
A few more tidbits from the business and political world-
Here is a look at the Disney Mobile Strategy-http://techcrunch.com/2012/03/30/its-a-disney-party-dena-disney-team-up-to-launch-mobile-games-worldwide/
There
are two kinds of businesses- those that have problems, those that are
going to have problems. Yes, even Starbucks- http://www.nytimes.com/2012/03/31/business/starbucks-tailors-its-experience-to-fit-to-european-tastes.html?ref=business
Obama is losing steam among young voters-http://www.bloomberg.com/news/2012-03-30/obama-campus-fervor-losing-to-apathy-as-students-sour-on-2012.html
If you forgot the Covestor Next Invest conference, here is a link as it is available through April 21, 2012-presentations.inxpo.com/Shows/Covestor/R...
I
hope everyone is enjoying the spring. Stay happy and healthy and enjoy
the weekend. If you have any comments,on the blog or any articles,
please post them!!!
As always, on any company mentioned
here, past performance is not a guarantee of future returns. Investing
involves risk of losses on invested capital. One should research any
investment and make sure it is suitable with your objectives, risk
tolerance, risk profile liquidity considerations, tax situation, and
anything else pertinent to your financial situation. Also, the CFA
credential in no way implies investment returns will be superior for any
charterholder.
(If you are interested in seeing the
latest Seeking Alpha articles about specific stock picks from Yale Bock
and Y H & C Investments, click the following links)
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