With negative profitability, rising costs, and an overvalued stock price, Overstock (OSTK) is on October’s Most Dangerous Stocks list and is in the Danger Zone this week. Could OSTK be the next victim of the retail market?
With a strong and growing e-commerce presence, history of profit growth, and an undervalued share price, Williams-Sonoma (WSM) is this week’s Long Idea.
Any brick and mortar retailer carries some risk in this environment, but investors who really want exposure to this sector should look for higher quality companies than TUES. Other retailers have superior profitability metrics, better branding and e-commerce capabilities, and a cheaper valuation. The only reason to touch TUES is to short it.
The all-cap blend style ranks third out of the twelve fund styles as detailed in my Style Rankings for ETFs and Mutual Funds report. It gets my Neutral rating, which is based on aggregation of ratings of 36 ETFs and 612 mutual funds in the all-cap blend style as of February 6th, 2013.
HIDDEN GEMS:
1. Our discounted cash flow analysis shows that KIRK’s current valuation (stock price of $13.25) implies that the company’s profits will decline by 50% and never grow again.
2. Economic earnings are growing faster that reported accounting earnings.
3. Free cash flow of $32.2mm or 12.4% of its enterprise value during the last fiscal year.