Best Buy (BBY) 2012 Review

Best Buy Company BBY)sells consumer electronics, personal computers, software and appliances through 1564 stores in the US and Canada and 2430 in Europe.

The company has grown profits 16% over the last 10 years and its annual dividend from $.27 in 2003 to an expected $.62 in 2011. It has earned a return on equity 20%+ since 2002. BBY stumbled a bit in 2008 as the economy softened. However, it has bounced back since then and should continue to grow as a result of:

(1) the company’s broad product line, locally tailored store format and brand marketing strategy provides an edge over competitors,

(2) direct sourcing to the manufacturers allows it to lower product costs and achieve supply chain efficiencies,

(3) an ongoing stock buy back program.

Linear Technology (LLTC) 2012 Review

Linear Technology (LLTC) designs and manufacturers high end linear chips which monitor, amplify or transform continuous analog signals associated with real world phenomena (temperature, pressure, weight, position, light, sound and speed) and markets them in over 4,700 products. 

The company has grown profits and dividends between 7-20% annually over the past 10 years earning in excess of a 20% return on equity. LLTC suffered in the recent economic downturn; however, it should be able to resume earnings growth because:

(1) it is broadening its product base to take advantage of infrastructure build out and the trend toward energy efficiency in industrial applications,

(2) long term, it will benefit from the strong global demand for advanced electronics,

Steve Cook -- The Morning Call - July 23

By Steve Cook
Strategic Stock Investments

The Market

Technical

The Averages (DJIA 10322, S&P 1093) put in a great day yesterday busting through the upper boundary of the April to present down trend (9027-10226, 951-1080) authoritatively. In fact, yesterday’s move qualified this break based on distance. Given the extreme volatility of late, I would like at least one more day of time. In addition, while it is clearly a positive that stocks have made that higher low (than 9645, 1009), it would bring great comfort to have the Market make a higher high--which is not that far away (10413, 1099).

Steve Cook on Gold

From Steve Cook at

CJS Research

The price of gold (GLD) traded down last week, touched the lower boundary of an up trend dating from October 2008 and then bounced. It looks like it will open down modestly this morning. All our Portfolios will Add to their GLD position at the Market open. This will bring the size of this position to approximately 9% in each Portfolio.

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Why Dividends are Important—Part III

By Steve Cook.

Steve Cook has 36 years experience in trading and analyzing both fixed income and equity securities, as well as in private placements of debt and equity. CJS Research is currently offering a 30 day free trial of their Dividend Strategy Product.

Why Dividends are Important—Part III

Quick, what’s a stock worth?

Answer: the discounted value of future cash flow. Not book value, not a new technology, not a hundred and one of other factors that you can name.

Sure all those factors may bear on a stock’s dividend or the price for which a stock is ultimately sold. But the only way we as investors get paid a return for the money we invest in a stock is to either have that money returned to us as dividends, or to sell that stock at a price higher than we bought it. Everything thing else is just a bunch of numbers on a piece a paper. You can’t eat them or spend them.

Now think about the decision making process that the companies in whose stock you are investing go through when they make an investment decision. The rate of return on a project is equal to the discounted value of future cash flow--what the project will be ‘worth’ in ten years is irrelevant.

For the company

• it is when do we get our cash back,
  
• how much do we get back
  
• and what is the probability of both?

In these calculations, the quicker the return and the higher the probability of the return, the more the cash flow is worth.

So why should you or I analyze our investments any differently? Why should the future market value of a project (price of a stock) matter more to us than it does to the guys who are running it? And why should the future value of a project (price of a stock) matter more than the current return on that project?

A simple way of thinking about this is as follows: Suppose that you just bought Coca Cola today and I offer you three opportunities to increase your investment return on Coke, pick one.

1.  if Coke pays a dividend on its next scheduled payment date, I will give you a $500 bonus,
   
2.  if Coke pays a dividend equal to or greater than its last dividend payment, I will give you a $1,000 bonus 
3.  if the price of Coke’s stock on its next ex dividend date is higher than it is today. I will give you $1,500.

Which one would you take? If you didn’t chose (2) stop reading, take the dividend you earned from Coke and go buy a Playboy.

The point is that of the two sources of potential return on your investment, (1) dividends a lot more likely to occur on a short term basis than capital gains (2) they are an immediate return on money that you can either re-invest or spend--its Your Money and your choice and (3) a rising stream of cash flow is worth a lot more to you [and corporate management] today than what the project [stock] generating that cash flow might be worth five years from now.


News on Stocks in Our Portfolios

3M (Dividend Growth Portfolio) reported first quarter earnings per share of $.81 versus expectations of $.86 and $1.38 reported in its comparable 2008 quarter.

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