Friday, April 06, 2012

Target (TGT) 2012 Review

Target (TGT) is a leading discount retailer concentrated in California, Texas, Florida and the upper Midwest. It has grown profits and dividends at an 11-14% pace over the last 10 years earning a 15%+ return on equity. 

The company faltered a bit in its 2008 fiscal year due to the slowing economy but has since recovered and should continue growing at an above average rate as a result of:

(1) improving comparable store sales and operating margins due to its product innovation, aggressive pricing strategy and its efficient, multi channel marketing strategy,

(2) rising store productivity arising from expanded grocery offering, better store layout and an enhanced in-store shopping experience,

(3) introduction of smaller stores in urban markets,

(4) expansion internationally.

(5) active stock buyback program.


(1) it is a highly competitive industry,

(2) a volatile credit market could jeopardize growth plans,

(3) lack of current geographic diversification,

(4) its customers are sensitive to macroeconomic factors.

TGT is rated A by Value Line, has a 52% debt to equity ratio and its stock yields 2.6%.

Statistical Summary

Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2002
TGT 2.6% 17% 30% 10
IND 1.5 11 25 NA

Debt/Equity ROE EPS Down Since 2002 Net Margin Value Line Rating
TGT 52% 17% 1 4% A
IND 50 18 NA 3 NA


Note: TGT stock made good initial progress off its March 2009 low, surpassing the down trend off its September 2008 high (straight red line) and the November 2008 trading high (green line). Long term, TGT has struggled to maintain an up trend (blue lines). Intermediate term, it is in a trading range (purple lines). Short term it is in an up trend (brown line). The wiggly red line is the 50 day moving average. The Dividend Growth Portfolio owns a full position in TGT. The upper boundary of its Buy Value Range is $52; the lower boundary of its Sell Half Range is $107.

Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.