It has been an amazing set of days on the Stock Market, with almost an entire week of all-time highs on the DOW Industrial Average, and we are excited to be blogging once again (we apologize for the long wait, our full-time student schedules prevent us from blogging as much as late last year)! We are going over our Consumer Goods sector today, briefly describing each company and their standings, as well as our predictions, much like the last post on pharmaceuticals!
Target (TGT) - Target is a general retail brand that was established in 1902; the current CEO is Gregg Steinhafel, and stocks sell for about $67. As we first observed statistics, we noticed a disappointing trends downwards in the last years. The recession make its impact, and as investment declined, stock prices began decreasing and hit a low of just over $58 in late 2012. Although revenue decrease slightly in late December as well, revenue for the 4th Fiscal QT was up 0.8%. Also, Target renewed their online shopping with their new Price Match Policy. With major online marketers like Amazon.com, Target introduced a program to draw more customers back to the nationwide brand, both in stores and online. We predicted strong growth following this policy, and shares have since increased to $67.34 (3/11 closing). It has been upgraded by analysts multiple times in the past two months (we were a full month ahead of them), and we continue to back the company. Growth in dividend may slow down, but we still expect long-term increases. Invest!
Wal-Mart (WMT) - Wal-Mart is also a general retail store, and was established in 1909. Stocks are a bit more expensive, topping $72. The current CEO is Gregory Wasson. Wal-Mart's advantage over many large general retail stores (including grocery in many cases), is its international presence. The stores are found everywhere in the United States, in many other countries, and, as we will discuss soon, are appearing on college campuses. Unfortunately for the company, they experienced earnings below expected, and EPS resulted in being only $1.51, instead of $1.53-1.58. In early January, Wal-Mart introduced a new contact lens program, allowing customers to purchase brand name contact lenses for a, well, Wal-Mart price. Also, Wal-Mart has been experimenting with a so-called "Wal-Mart On Campus" - a miniature version of a regular sized store (10% of a normal, 2% of a super-center), to allow college students to still benefit from the the store's low prices. Only two currently exist, but, if they are sustained with growth and more purchases, they could soon sprout on many campuses throughout the states. We encouraged investment in Wal-Mart as well, and have since made over $30 profit on 5 shares.
CVS Caremark (CVS) - CVS is a nationwide pharmacy which also sells general products. It was introduced in 1963, currently sells for $52, and is headed by CEO Larry Merlo. Stocks have been on the rise since late 2011, with relatively few bumps along the way. In January, CVS organized a further group effort to help victims of Hurricane Sandy, creating a partnership between BarnabasHealth, a local clinic group in New Jersey, and its own MinuteClinic. This temporarily allowed for strong growth in investment, but a controversy surrounding extortion via MoneyPak (Green Dot, with PayPal) caused confusion with CVS. The company, one of few still selling MoneyPak's after FBI advisories to take them off the market. These products installed a pop-up, virus-like program on your computer when used, which requested a specific domain and login, followed by a demand to pay a fine to an FBI look-alike. However, once that situation cleared up, CVS returned to its habitual growth, and has, since our own simulated investment, increased almost 6%. We continue to encourage investment, but to expect significant profits mainly in the long-term.
Walgreen (WAG) - Much like CVS, Walgreen is also a nationwide pharmacy with minor general retail. It is larger than the latter by 1300 stores, making it the largest pharmacy in the United States! Walgreen has been showing remarkable growth since taking a large hit in mid-November. To explain such large fluctuations in WAG's stock, the company lost major contracts with drug producers and distributors, forcing it to search for other, more reliable options. Fortunately for Walgreen, they are now back with stable deals. Their major distributor is Alliance Boots, providing 45% of their prescription drugs. On a more recent note (we don't have much to say about Walgreen, really), price targets were risen from $40 to $47 -- that is, until sales begin to drop. February sales were down 2.2%, and investors began taking a hit. More investors + less cash flow = smaller dividends. We projected growth in the company, and it has grown just under 4%, but we do not project significant earnings in stock investment in the short term.
Home Depot (HD) - Home Depot is a home improvement warehouse chain that was established in 1978. The current CEO is Francis Blake, and the company sells shares for over $71. Since the beginning of the year, with a new fiscal year, the company has been doing very well on the stock market. Stocks reached a year-low price in late December, but The Home Depot was labeled one of the top hiring companies with the arrival of the new year. A conspiracy appeared within HD's books, involving Lowe's and Orchard Supply (OSH) over a possible specialized monopoly on a large number of goods. Supposedly, this company was providing The Home Depot with better contracts and access to goods only they could sell; naturally, Lowe's attacked both companies, accusing the specialized sales agreement as an attempt to monopolize the home improvement market. However, last FY showed strong results, and stocks flew off the charts - the company reached a 13 year high in stock price, immediately following the earnings conference, especially considering the 34% increase in dividend for 4QT by itself. Our own stocks in the company fared excellently with the earnings report, surging 11% from our $64 purchase tag. We strongly encourage to invest in HD, as the earnings release will attract many more investors, and the ability to make good money.
Lowe's (LOW) - Lowe's is also a home improvement store, and was established in 1952. Although it is older than the former, shares are only about $40. The current CEO is Robert Niblock. LOW observed a trend similar to that of HD - a slight increase in stock price in late November (Christmas trees and decorations, anyone?), followed by another dip with the turn of the year, BUT back on the rise with the new year. It was originally downgraded to a sell status in early January, but new funding with solar companies allowed for sustained growth. Their main solar energy counterpart, Sungevity, received $125 million from investors for solar panel construction in nine states, with the largest contributions to fund California and Arizona (lots of sun). Recently, Lowe's released its earning report to the public and....was a huge hit. Stock prices began falling in the days preceding the report, expecting sub-expectation revenues. Surprisingly, FY2012 net earnings were on a significant rise - 6.5%, to hit an impressive $2 billion. Granted, The Home Depot topped more than twice that, but Lowe's did better than expected. We benefited from the surge, as our investments profited 12% since we bought them. Lowe's seems to be heading on a path to more success, but we advise to invest cautiously. The company is not one with a reputation to always do very well, so we advise caution.
Mattel (MAT) - Mattel is a toy manufacturer and distributor that sells goods on a worldwide basis. It was established in 1948, and holds a dominant share in the toy market (see the list of their current products at http://corporate.mattel.com/our-toys/default.aspx ). The current CEO is Bryan Stockton, and the mega-company sells stocks for $41. The company interestingly, has more share price fluctuations than the previous consumer good companies we discussed. The arrival of 2013 brought some stability with it, however - the American Girls 2013 catalogue was released, and quickly thereafter a new price target was set from $38 to $41. When Mattel published their earnings from the holidays, they boasted a confidant 2%. However, their main competitor, Hasbro, announced a nearly 4% dividend. Investors had already begun shifting stances towards Hasbro with the turn of the year -- they reported fewer sales, but higher earnings in 2012 -- but also announced to layoff a great number of workers in an attempt to save money (what is more important: employment or earnings?). Since these announcements, Mattel has shown consistent growth and we advise to invest in the company now. We have made 13% profit in less than two months, and expect to continue to see growth. Do not be discouraged if profits slow down; they will skyrocket with the Winter holidays, and bring increased dividends at those times.
