Best Buy

Why buy Best Buy. First of all its the leader in its industry. Circuit City just made the genius decision to fire its highest paid, best floor staff to cut costs. Radio Shack brick and mortars are less than half the size. Destroying the competition isn't a good enough reason to invest. The company is operated well and has consistent rising earnings per share and good cash flow and even pays a dividend. The company is customer oriented. They just announced that 200 Apple in-stores will be implemented. This is a sleep at night stock in my opinion because of their competitive advantage and likely stable future prospects. I'm not sure in 15 years how the internet will factor though.

None of this matters though unless the shares are undervalued. The company can fetch a premium stock price and can grow EPS at 15% year over year. Its currently selling for about 17 times earnings at $47. I think at a PE in the low teens it may be undervalued this year. It could become more attractive in a market sell off or recession which would be a good time to pick up shares.

Update on Caribou Coffee (CBOU)

There is good and bad for Caribou. More bad but a little hope I feel. 1st quarter same store sales fell 1% while first-quarter sales where up 10 percent to $61.5 million.The company said other sales, which consist of sales to commercial customers, licensees, mail order and Internet sales, grew 39 percent to $3.7 million from $2.7 million a year ago. If I was a shareholder I wouldn't want to see anymore red. I think its better off to get profitable and grow slowly than to open stores like crazy and hope for the best. I guess this is why they are getting help from Tom Zosel Assoc. See link below. Heck, even stay out of Starbucks way if you have to and focus on the better segments like bean sales for awhile. I wonder where these analysts come up with the price target of 8 for Caribou. Price targets are useless in my opinion. Earnings guidance isn't even a science. Anyway, I might pay a little more than liquidation value right now for CBOU assuming they ever make money again.

Tom Zosel Associates Helps Caribou Coffee Model Its Supply Chain Network to Tap Logistics Efficiencies

http://biz.yahoo.com/bw/070409/20070409005041.html?.v=1

Apparently they blamed the weather for impacting comps. I think its unaccountable when companies blame the weather for not getting it done.
It's going to be awhile until the company shows any hope of being worth investing in. Disclosure:author has no position in CBOU

Screen For Deep Value

I was looking for companies selling for less than what they are worth with a zach's stock screen recently. I need about a week and 5 people to look deeper unfortunately because I couldn't find a company in this screen that didn't get me interested. Interested that it was maybe undervalued that is. A lot of financials were found with the low price to book and lack of debt to equity filter but not all. What it mostly found was small companies in pretty good to great financial shape with growth potential that are maybe sold off for no good reason. The low market cap is important because its harder to find great large-caps on sale generally. Looking for smaller companies with growth compares to Bass fishing where nobody else is fishing. You might get better results casting where nobody else has looked. You have to scavenge the bottom of the lake for that 20 pound lunker large-mouth. In this case they are maybe lunker 40 baggers.
A couple banks looked like they could be good long-term investments or takeover targets. Access Nat. Bank ANCX , American River Bankshares AMRB. This retailer United Retail Group Inc. (URGI)may be cheap considering their customers fashion tastes don't change and they keep good brand loyalty. This scares me about clothing companies though even the best. I haven't looked at all of these companies instead focused on a lot with high ROI and low price/cash flow. some that caught my eye...

ASI
CLDN-this company has delivered. Literally and figuratively.
OPMR
AMCP
CLMS

Characteristics of the Screen

# OF COMPANIES: 39

Market Cap (millions)<= 400
Price/Book <= 3
Price/Cash Flow <= 20
PEG Ratio <= 1
Current ROE (TTM) >= 10
Current Ratio >= .8



AMCP
AMRB
ANCX
ASI
BBSI
CACH
CBON
CLDN
CPE
CPII
CPSS
CVCO
DEIX
DELTA FINANCIAL
EPEX
GEHL
GIFI
IBCA
ICTG
LCUT
MBWM
MESA
MIG
MRLN
NAVR
NNBR
OPMR
PROS
RADN
SAIA
SNIC
TBSI
TTMI
UDRL
UPFC
URGI
VTNC
XJT
XPRT LECG CORP -found them before actually

Thoughts on Valuation part 1

I've read a lot of methods of valuation for public companies. One striking consistency I've seen recently even among professional writers is comparing U.S. companies PE ratio, forward or trailing to the S&P 500 or the market.

I don't think PE is the greatest ratio for determining value. I don't think any ratio alone can find the intrinsic value of a company but it can be useful to get a ballbark idea in some cases. Having said that it would seem more usefull to compare the companies PE or price to free cash flow, EV to fcf/ebit etc. to another company in its same industry. This company competes next to it unlike the overall market with thousands of different companies with different
products,services,accounting,growth prospects and so forth.

Maybe they are making the case that the S&P 500 could be your opportunity cost so why invest in this company with its current valuation when you can buy the market for cheaper through a fund or etf. An investor should always consider opportunity cost but I don't see the logic in this comparison because the US economy and Large-Cap stocks have very different prospects and barriers than say one single company. Say the company has a pe of 10 and the market is 20. Who knows what the market is going to do. The FED may not even know. Say the company grows at 2% a year and the market 15. This has to be taken into account as well. The companies ability to compete and maintain revenues among many other measures seems more important than a simple valuation ratio comparison to the overall market or index. In fact, it seems out of place.

Slumping Soft Drinks Coca Cola KO & Hansen Natural HANS

If there was an alternative/ energy drink etf this might present a good opportunity for some returns. But for a "know something investor" why buy into an etf when you can pick the best individual companies in it? As John Maynard Keynes said, "to carry ones eggs in a great number of baskets without having time or opportunity to discover how many have holes in the bottom is the surest way of increasing risk and loss."

"Beverage Digest reported that the total sales volume of soft drinks in the United States fell 0.6 percent in 2006, following a 0.2 percent decline in 2005. The industry sold 10.16 billion cases of soft drinks in 2006, down from 10.22 billion in 2005(reuters.com)."The carbonated soft drink industry has moved from roughly 3 percent growth in the 1990s to modest declines in the last two years," Beverage Digest reported, saying the estimate included energy drinks, a very fast-growing segment."

I see Coca-Cola KO with the largest market share in softdrinks and a flat share price over the last 10 years and Pepsi PEP not a true drink play as it is the largest producer of salty snacks. I wonder if these types of companies are going to grow as fast as these new energy, coffee, healthy drink companies are? Supposedly people are looking for healthier and more invigorating drinks and foods for that matter, so one should find these companies and see if there is any hidden value. If the others are valued the same as Hansen Natural Corp. (HANS) then it may not be strikingly obvious. Hansen sports huge multiples but has great returns on equity with little to no debt. Hansen has had its time and this all could be just a fad. I haven't found any other independent companies but they are probably the same. Valuation isn't easy and is far from precise because you can't see into the future. Was Google overvalued at $150? It looked like it to me then. The big guys will probably have the only leading energy drinks next to RedBull in a few years because they're big and they can. Capitalism at its essence.




1. http://today.reuters.com/news/articleinvesting.aspx?type=comktNews&storyid=URI:2007-03-08T194514Z_01_N08161106_RTRIDST_0_BEVERAGEDIGEST-UPDATE-3.XML&rpc=11

Who believes Jim Cramer?

I really like Jim. He is also great on TV and I respect him for that. I have and sometimes watch his show because it's one of the only real in depth stock shows on cable. I will take anyone seriously who has results and a great track record with a proven investing strategy. I don't think he has this though. I'm skeptical of his actual record before the show even. copy and paste below link into browser.

slate.com

Companies I wish were public

Some companies I wish were public so I could get a good look at them.

Turbo Tap
What a product.
http://www.turbotap.com/

Berkley
anybody who's fished has probably bought Trilene line or one of their products.
http://www.berkley-fishing.com/

Bluegreen Corp. (BXG) Undervalued?

Bluegreen Corp. (BXG) undervalued?Bluegreen has two segments. Bluegreen Resorts segment acquires, develops, and markets vacation ownership interests in its resorts. The Bluegreen Communities segment acquires, develops, and subdivides property & markets residential home sites to retail customers who seek to build a home in a residential setting.

The company has steadily grown shareholder equity year over year for the last 10 years and net profit margins are the best in 10 years as well but the stock has never sported great valuations and hasn't been loved.

Crunching the numbers A very brief analysis
Using an earnings discount model, the fair value of the company per share is $19. As of March 15 2007 it trades at $11. This is assuming a base earnings per share of $1.24 and 5% earnings growth for the next five years, 3% thereafter. Compared to an opportunity cost of another investment vehicle with a 10% return this seems pretty conservative considering a risk free 10 year gov bond is about 5%.

The question is. Can they deliver? I don't have a lot of confidence in the stability of earnings and operations, but they are worth keeping an eye on.
-author doesn't own Bluegreen Corp.

About

About Stock Pursuit

My name is Mark and I have been investing in stocks since 2001. I hold a B.A. in History from the University of North Carolina at Charlotte. I am also a member of the American Association of Individual Investors.

I favor a contrarian value investing approach in stocks with an emphasis on fundamentals and also technical analysis. I don't shy away from small and micro-cap stocks aka penny stocks because often Benjamin Graham cigar-butts aka Net-Net's which are typically small companies present some of the greatest values.

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YP Corp YPNT Livedeal LIVE

It publishes yellow pages through www.Yellow-Page.Net, www.YP.Net, and www.YP.Com. I listened to their 1st quarter 07' conference call and didn't hear any big troubles. I need to do some more homework on how the business works and potential setbacks from competitors. It seems solid as businesses need Internet presence and YP provides that. Their most recent balance sheet for the end of December had Total Assets of 26,316 against Total Liabilities of only 3,087, 2934 of that Accounts Payable and no long-term debt. This balance sheet seems better than a lot of stalwart S&P 500's. They are seeing more customers the CEO says from the telemarketing campaign and have a new partnership with web.com. This company is off the radar of the big institutions with a tiny market cap.

Brief Analysis
They were profitable in the first quarter of 07' with $.01 eps. Actually an increase from last year. Reuters shows estimates for full year 07' of .07 eps and 08" up to .15 eps. A free cash flow model would be the best to find the intrinsic value of the business but assuming a very conservative full year 07' eps of .03 cents per share and 08's eps of $.06. It would be worthwhile to hold the shares in 08 with a pe of 13.16 and a eps yield of 7.5 at a share price of .79 a share.
If eps continues to grow in the future the stock is a bargain at under a $1. I don't see the company encountering any troubles in the near future. Over the next year or two the worst thing that could happen is they continue to deliver so so and the stock goes no where. I don't invest in stocks. I invest in businesses by buying shares of stock. This company is worth watching.
I don't own any shares of YP Corporation at the time of this writing.


"YP Corp. is America's Local Online Yellow Pages(tm) and offers businesses a simple and affordable way of creating a web presence and marketing their products and services to local audiences online. The Company offers an Internet Advertising Package, which provides advertisers preferred placement in yellow page search results and their own Mini Webpage(tm) where they can provide potential customers with details about their products and services.

About Web.com

Web.com, Inc. (NasdaqGM:WWWW - News), is a leading destination for the simplest, yet most powerful solutions for websites and web services. Web.com offers do-it-yourself and professional website design, website hosting, e-commerce, web marketing and email. Since 1995, Web.com has been helping individuals and small businesses leverage the power of the Internet to build a web presence. More than 4 million websites have been built using Web.com's proprietary tools, services and patented technology. For more information on the company, please visit http://www.web.com or call 1-800-WEB-HOST."

-source, Yahoo! Yahoo.com, http://biz.yahoo.com/pz/070222/113995.html

Waiting For Something Good at Caribou Coffee CBOU

I believe Caribou does a couple things better than Starbucks. Starbucks is the juggernaut of coffee shops. There are Starbucks across from Starbucks at street corners. Caribou is # 2 right now in the industry second to Starbucks and has slim to no chance of ever being #1. Caribou has more traditional espresso beverages (even though SB tries to use fancy Italian) like calling a macchiato a macchiato not a latte like SBux.

Caribou has been profitable on the bottom line before but not for long. Whether the aggressive new CEO's plans will take market share from Starbucks remains to be seen. Recent same store sales were negative, decreasing 1%. I like what Caribou is doing with the brand getting it out there with General Mills with a snack bar and I believe selling beans(which is one of the most profitable items by the way) in stores finally. Caribou actually may have a sort of competitive niche over Starbucks in that their beans are typically a lighter roast than Starbucks. Lighter coffee's actually have slightly more caffeine(roasting takes some out), more acidity and a different flavor which can be sweeter compared to Starbucks darker roasts. A consumer report in 2004 ranked Caribou's light Colombia #1 among 42 Colombian gourmet coffees. I believe in that same report Dunkin Donut's arabicas had higher ratings than Starbucks.

Opening many more unprofitable Caribou stores is scary for the company maybe even Krispy Cream scary but their other segments seem great like the recently announced Coke bottled cold coffee beverages that are to be sold in stores next year. The same product as Starbucks. I feel Caribou does some things much better than Starbucks, from my experience working at Caribou and seeing and hearing things from Starbucks customers. Caribou aggressively focuses on customer service, including remembering customer names and drinks to get repeat business. Some Caribou customers are looking for a certain atmosphere that is different than a Starbucks or the Starbucks imitators. I think Caribou's Alaskan lodge atmosphere accomplishes this.
Caribou like any smart fast food or quick serve company uses computer screens that display the upcoming orders as opposed to yelling or writing down orders which has more room for errors and is less systematic. Starbucks doesn't use this technology. Many Caribou's have recently upgraded to the espresso machine tech that has been in Starbucks.

I have mixed feelings about Caribou and their ability to become profitable consistently year over year. I think buying shares before a proven growth strategy and business plan with solid cash flows & earnings is purely speculation. If things improve buying below intrinsic value could be lucrative. Buying Starbucks below intrinsic value is an almost sure 2 bagger.

There are some positives for Caribou along with finally getting the brand out in stores and the coming bottled iced coffee drinks with Coke. I like what I'm seeing from Caribou and I hope same store sales stay positive and other segments keep improving and something trickles down to the bottom line consistently then I will maybe take a position if they're at a cheap price.

Related
Caribou Coffee CBOU Needs To Go Back To The Drawing Board
Update on Caribou Coffee CBOU
Starbucks SBUX New Appointment Doesn't Mean They Will Print Money

full disclosure: I don't own any Caribou Coffee,Starbucks or Coca-Cola shares as of this writing.