So, sales at grocery store chains. As an investor I always try to think about how to make more money, who is making money, and who is losing money. My recent visits to the local Ralph's and Von's stores have left me a little puzzled: there are some CRAZY sales going on. Some examples I've seen include apples that one week cost $1.99/lb and the next are on sale for $0.39/lb; ribeye roasts that were going for $12/lb are on sale for $4/lb; and breakfast cereal that costs $4/box instead of $2/box.
What's the significance? I understand that companies like Kroger and Safeway operate on relatively thin profit margins (in the 1-2% range, on average -- check out the Key Statistics page on their respective Yahoo! Finance pages). When stores can temporarily drop prices like that, are people really being lured into the store to buy more expensive items that aren't on sale? Are the retail prices normally so high that it's no big deal for them to drop the price by 60+% for a week? Are the food suppliers and producers taking the hit and subsidizing the sale prices?
I don't know the answers to all those questions, but I do feel like the grocery store sales today are better than the sales I saw a year ago. Unemployment is still rising, although decreasingly fast over recent months. The Dow Jones Industrial Average just hit the perhaps psychologically significant 10,000 mark. What does it all mean, Stimpy?
Even if you don't know the answers to those questions, either, consider stretching your dollar by buying things on sale and avoiding the "I need this NOW!" purchases.
Full disclosure: Author is long shares of COST at the time of writing.
In case you haven't heard, Newegg is planning an initial public offering (or IPO) worth up to $175 million.
According to wikipedia, an IPO is "when a company issues common stock or shares to the public for the first time. They are often issued by smaller, younger companies seeking capital to expand, but can also be done by large privately-owned companies looking to become publicly traded." Companies might decide to plan an IPO for a variety of reasons, but Newegg reportedly plans to use the proceeds to repay debt, for general corporate purposes, and to expand into Canada and China.
At the time of writing, Newegg has been around for nearly 10 years. It started out selling computers and computer parts to gamers and other computer enthusiasts, but it's developed into something of an electronics super-retailer. Newegg claims to have been profitable since 2001, and it reports that in 2008 net sales reached $2.1 billion. That's no small chunk of change!
Newegg has treated me kindly in the past, but would I invest in it? Absolutely I would, under the right circumstances. Newegg generally offers a variety of high quality parts at reasonably good prices. Sometimes you can find cheaper prices at places like Amazon.com or from Dell, but can you count on the same high level of customer service that you'd receive from Newegg? Hard to say, but I bet "no." I know my personal experiences with Newegg all have been very good, and it impresses me that they've been able to make money while providing -- and building a reputation for -- excellent customer service.
I don't know if I'd jump into Newegg shares on the first day of trading, though. I like to understand whatever I invest in, so before hopping in I'd need to gather more information. What will Newegg's valuation be? How quickly have revenues and profits been increasing? I love data, and I need more of it! Data, data, data. Multiple techniques and more data.
In summary, I like Newegg The Company. Before investing in Newegg The Stock, I've got some more research to do.
I'm getting ready to sell my PCG shares. I've set a limit sell @ $39/share.
Some background: when things got crazy toward the end of last year, on 10/13/2008 I bought 20 shares of PCG @ 32.39 (cost of $657.79 including commissions). I'd been looking for safe, dividend-paying stocks whose income wouldn't vary much in a recession. People might cut back at restaurants and travel, but they still have to pay their electric bills, right? After a huge dip, the circumstances and the dividend ($1.56/share => 4.8%) looked right for me. I'd set up my PCG holdings with DRIP so that I'd accumulate more stock as the dividends paid out.
On 1/16/09 I received a $7.80 dividend (0.21 shares). PCG raised their annual dividend to $1.68.
On 4/16/09 I received a $8.49 dividend (0.223 shares).
On 7/16/09 I will receive a $8.58 dividend, since I've held long enough for this dividend period.
Why did I choose $39 as a sell price target? Since 2008 that seems to be toward the upper range of where it's traded. It's recently been upgraded to Outperform by Credit Suisse (April 2009), Oppenheimer initiated coverage with an Outperform rating (June 2009), and it's been going up. Although macro-economic conditions have gotten worse, and continue to get worse, their pace of worsening has slowed. I'm ready to part ways with PCG, take a gain, and look for other opportunities.
When I sell at [hopefully soon] $39, I'll net 20.43 shares * $39 = $797 - $10 commis. = $787 + ($9) last dividend = $796. Given my initial investment of $658, I'll be netting $138 ($796 - $658) or 21% ($138/$658) since October last year.
In hindsight, I should have come up with a better exit plan earlier on. I already could have sold at $40+, higher than my now near-term price target.
The stock doesn't have a huge trading range ($32ish-$39ish) and doesn't have a ton of growth prospects that I can tell. On that note, I estimate it'll be a consumer of solar technologies more than it'd be a solar innovator. Anyways, if the stock were to get oversold and dip back down to the $33 range, I might pick up shares again or buy some calls with the intention to flip them fairly quickly for a profit.
