A: With the world's largest retailer going all out to capture sales through deeper discounts in the United States and expansion abroad, this is a spirited holiday season.
- Andrew Leckey
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Jan. 6: Sun Microsystems remains a work in progress
IN THIS PACKAGE
- A lesson in getting college help from Uncle Sam
- Shop around for credit card deals
- Year-end stocks rally not a basket of cheer for bonds
- Older Americans fall deeper into debt hole
- The savings game
- The Leckey file
- Getting started
- Spending smart
- Taking stock
- Merger fever becomes factor in stock market rally
- The week ahead
- Wal-Mart Stores, Inc.
See more topics »
Indicative of a malaise that has set in during the past couple of years, Wal-Mart shares (WMT) are nearly flat this year after a decline of more than 11 percent last year. Energy prices, consumer debt and prospects for increased labor costs or unionization in its stores are some worries holding back the stock. Nonetheless, it remains an aggressive company that is financially strong, working to reduce inventories and always on the lookout for growth.
The most profitable stores, its Supercenters, have room to expand in the Northeast, California and some large metropolitan areas. Urban expansion will, however, translate into higher real estate and wage costs than it has experienced in its most of its locations.
Wal-Mart recently expanded its $4-per-generic-prescription program to all of its 3,810 U.S. pharmacies. Its list of generics represents one-fourth of the prescriptions dispensed in pharmacies nationwide. Just as Wal-Mart's low-cost grocery initiative stunned traditional grocers as it soon became the largest grocer, drugstore chains are concerned about this move.
Internationally, Wal-Mart is entering India's retail market through a partnership with Bharti Enterprises Ltd. Wal-Mart is one of the biggest U.S. importers of Indian goods and also is stepping up its sourcing in China.
Wal-Mart de Mexico, which is controlled by the U.S. retailer, just received approval from Mexico to initiate savings and loan services there in the second half of 2007. That's the first time for Wal-Mart anywhere.
The consensus rating on shares of Wal-Mart is between a "buy" and a "hold," according to Thomson Financial. That consists of six "strong buys," five "buys" and 11 "holds."
Earnings are expected to increase 9 percent in fiscal 2007, ending in January, and 12 percent in fiscal 2008. Its projected five-year annualized return is 13 percent. All of those forecasts are about 1 percentage point below the level expected for the discount variety-store industry.
Q: Is Janus Contrarian Fund too good to be true? It really seems strong. -- L.S., via the Internet
A: It has been on an impressive winning streak in recent years. Success hasn't made it greedy, however, and it has a low annual expense ratio of 0.93 percent.
The $4 billion Janus Contrarian Fund (JSVAX) is up 23 percent this year, averaged 21 percent over the past three years and has a five-year annualized return of 16 percent. All these results rank in the top 1 percent of large growth and value funds.
There are several caveats.
First, the fund owns just 56 stocks, with some holdings making up more than 5 percent of assets. A significant change in one or two can sway results.
Second, nearly 40 percent of its portfolio is in foreign stocks, with India a favorite destination. That inevitably adds risk. Third, the fund used to be primarily mid cap, so comparing its longer-term results with large-cap funds isn't entirely accurate.
"I'm very impressed with Janus Contrarian and like the fact that it is such a standout in its category, rather than tightly correlated to the results of an index like so many other funds," said Andrew Gogerty, analyst with Morningstar Inc. in Chicago. "It could play the role of a core holding in an individual's portfolio, but only if investors are comfortable with the wide range of possibilities in the various stocks it holds."
David Decker, portfolio manager since the fund's 2000 inception, looks for companies with strong cash flow, accelerating returns on invested capital and good management. He especially likes to buy when a stock has been hit hard by some sort of controversy.
About one-third of Janus Contrarian assets are in financial services and one-fourth in industrial materials. Other significant concentrations are media and energy. The top holdings were recently St. Joe Corp., Liberty Global Inc. "A", Ceridian Corp., Owens-Illinois Inc., Coventry Health Care Inc., Reliance Industries Ltd., CapitaLand Ltd., Cemex, ICICI Bank Ltd. and Tyco International Ltd.
This "no-load" (no sales charge) fund requires a $2,500 minimum initial investment.
Q: What is the difference between a growth stock and a value stock? I find it confusing. -- S.J., via the Internet
A: It used to be much easier to determine, but the two have been morphing together.
Traditionally, a growth stock represents shares in a company whose earnings are expected to grow more rapidly than the overall market. It usually doesn't pay a dividend. These tend to be companies that haven't been around a long time.
A value stock traditionally is one that trades lower than fundamentals such as earnings, sales and dividends would seem to indicate, so it is therefore deemed undervalued. It often has a high dividend yield and is in a more cyclical, mature market segment.
"When I started in the business in the early 1980s, the difference between growth and value was distinct," said James Paulsen, chief investment officer with Wells Capital Management in Minneapolis. "There has been a blurring of the two because everyone is now interested in growth at a reasonable price."
For example, the term "blended" often is used for mutual funds that seek stocks with the traits of both growth and value.
"Most good data on growth versus value that goes back to the late 1970s indicates their performance is basically a wash," Paulsen said. "Each has had its periods in the sun, but it all evens out longer term."
Andrew Leckey is a Tribune Media Services columnist. E-mail him at email@example.com.