A: You're right about the pet trend.
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- Home lenders still pitching troubling refinancing plans
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- Some colleges begin to lesson tuition's burden
- For social security, timing becomes vital
- The savings game
- The Leckey file
- Getting started
- Spending smart
- Taking stock
- Can they do that?
- Turbulent financial times call for a certain resolve
- The week ahead
- Andrew Leckey
Jan. 13: Mattel's offerings are playing well in overseas markets
Jan. 6: Sun Microsystems remains a work in progress
- Credit Ratings
- Consumer Goods Industries
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With Baby Boomers especially warming to pet ownership, the business should continue to grow.
But that doesn't mean the economy and fierce competition can't do some growling along the way. The largest specialty pet retailer has lately been hurt by soft consumer spending. More ominous is long-term competition.
Enormous discounters such as Wal-Mart and Target are gaining momentum, it has a fierce rival in Petco and some pet owners simply prefer smaller pet shops that seem more personal. Meanwhile, PetSmart's newer stores haven't performed as well as its older ones.
Shares of PetSmart (PETM) are down 9 percent for 2007 following a 12 percent gain the year before. Net income declined 7 percent in its fiscal third quarter that ended Oct. 28, though the company raised its forecast for the full year.
PetSmart has an aggressive share repurchase program and strong cash flow. Significant gains are being posted by its veterinary and grooming services, of which it is the nation's largest provider. Its PetPerks loyalty card has been highly successful, it has been negotiating better prices from suppliers and it is selling an increasing percentage of higher-priced items.
The consensus recommendation on shares of PetSmart is between "buy" and "hold," according to Thomson Financial. That consists of four "strong buys," five "buys" and 10 "holds."
PetSmart operates 966 North American stores that are generally near large shopping centers, with plans to expand to 1,400. It plans to complete 100 new stores in its 2007 fiscal year. But despite its imposing size, the firm has just 12 percent of the industry's pet supply sales and 9 percent of its pet services. There's plenty of room to grow.
Earnings are expected to increase 22 percent for its fiscal year ending in January 2008 and 13 percent the following fiscal year. The five-year annualized earnings growth rate estimate is 17 percent compared to 14 percent forecast for the specialty retail industry.
Q: The results of Janus Research Fund seem strong. Is it worth investing in? --C.R., via the Internet
A: The fund, once known as Janus Mercury, is devoted to investment diversity.
Members of the equity research staff can make smaller portfolio selections, while larger commitments are decided through its analyst sector teams. The goal is to outperform the Russell 1000 Growth Index through adept stock-picking.
The $4.8 billion Janus Research Fund (JAMRX) is up 24 percent over the past 12 months to rank in the top 7 percent of large growth funds. Its three-year annualized return of 14 percent places it in the upper 10 percent of its peers.
"It really fosters a debate atmosphere where you have more than one analyst deciding the bigger picks for the portfolio," said Andrew Gogerty, analyst with Morningstar Inc. in Chicago, who recommends the fund. "Since there is a fine team doing the stock-picking, it is a good alternative to some single-manager-run funds in the Janus lineup that can have more pronounced sector biases."
The analysts have run this fund since early 2006. Portfolio manager James Goff is administrator, overseeing it and rebalancing sector weights to the Russell 1000 Growth Index on a quarterly basis. Janus Global Research Fund is run in the same manner.
Janus Research represents the first management opportunity for many of the analysts and places heavy emphasis upon their ability to convince the sector team about potential holdings. The fund company has stressed improvement of its research staff in recent years and devoted considerable money to this.
Within Janus Research Fund's diversified portfolio of 120 stock names, technology hardware represents about 17 percent, consumer goods and industrial materials each constitute 15 percent and health care 14 percent. Top holdings recently were Owens-Illinois Inc., General Electric Co., Apple Inc., Cypress Semiconductor Corp., EMC Corp., AES Corp., JA Solar Holdings Co., Celgene Corp., Avon Products Inc. and Reliance Industries Ltd.
This "no-load" (no sales charge) fund requires a $2,500 minimum initial investment and has a reasonable annual expense ratio of 0.97 percent.
"We've had some concerns about recent manager departures at Janus," Gogerty said. "Although that doesn't have a direct effect on this fund, we're watching to see if that puts a strain on the analyst staff."
Q: What is a "coupon" in reference to a bond? --F.R., via the Internet
A: The coupon is the amount the bondholder receives as interest payments.
Although the bond might have actual coupons that are torn off and redeemed for interest, these days such records are more likely to be kept electronically.
"So, if you invest $100,000 at a 6 percent coupon rate, $6,000 is the income generated," said David Bendix, certified financial planner and certified public accountant with Bendix Financial Group in Garden City, N.Y. "The coupon varies based on the bond's maturity, and the longer you go out, the better the coupon you should get."
While the coupon is one consideration when choosing a bond, there are others. The issuer's credit rating is important, with issuers with higher credit ratings likely to be offering lower interest rates. Keep in mind that the higher the interest rate, the higher the risk the investor assumes.
The price of a bond is important. Prices of existing bonds fluctuate depending on overall interest rates. For example, when interest rates rise, prices of existing bonds fall because investors can purchase new bonds at higher rates.
Andrew Leckey is a Tribune Media Services columnist. E-mail him at email@example.com.