The Don't Overpay for Mutual Funds Edition
11 October 2012
Are You Overpaying for Your Mutual Funds?
One of the challenges about taking car trips is finding a good place to fill up the gas tank. Pull off the Interstate at an exit that promises a number of gas stations and you'll likely find a number of options, each advertising their prices on signs you can read at a glance. Select the one with the lowest price, fill up the tank, and hop back on the highway, content that you got the best deal possible.
Until you reach the next exit, that is, where a gas station prominently displays its current prices, 3 cents less per gallon for regular! Now, instead of gloating about the good deal you got, you're filled with disappointment about overpaying for your fill-up. If you had just waited until the next exit, you could have saved 45 cents!
Overpaying for any good or service is something few people enjoy. Yet when it comes to investing, many individuals willingly overlook the costs of their portfolios.
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Kindles to Be Dropped from Wal-Mart
by Sean Pulrang
Just saw a story today in the NY Times that Wal-Mart will join Target in deciding to no longer carry the Amazon Kindle.
Not that Amazon's sales or earnings have been doing too well the last several quarters, but given the number of people who shop at both of these stores, I'm curious how much of an effect anyone else thinks this might have on Amazon's sales figures. At a recent announcement event for new Kindles, Jeff Bezos stated "We want to make money when people use our devices, not when they buy our devices." If Amazon is getting locked out of two major retailers, does it still sell enough Kindles through its online store and other physical locations (BestBuy, Staples, etc.) to keep its sales line growing at a reasonable rate?
Read More . . ..
Tracking Changes in a Company's Growth Rate
One useful feature in ICLUBcentral's Toolkit 6 software program is the ability to view the historical growth rate chart from the Visual Analysis graph. Here you can see the growth rates of EPS and sales for the last nine- to one-year periods so that you can identify whether a company's growth may be slowing slightly as it gets bigger. All companies eventually will see growth of sales and EPS decline a bit as they become larger companies, but the trend isn't always discernible on the Visual Analysis graph of the SSG.
But did you know that you can see the same multiyear growth rates on StockCentral, not only for sales and EPS, but also for pre-tax profit, pre-tax profit margin, net income, shares outstanding, dividends, book value, return on equity, free cash flow, and long-term debt? Load the StockCentral Company Report for any company from the Data tab, then scroll down to the Growth Rates section near the bottom of the page. By scanning across the rows from left to right, you can see whether growth has been constant, increasing, or declining. For items such as shares outstanding or the PTP as percent of sales, you might be content with relatively stable percentages. If long-term debt is growing faster and faster, that might be cause for further investigation.
This table can help you project future growth as well. The growth of a company's EPS and sales in the most recent years is likely to be more relevant to what may come in the next few years than the growth rate calculated by including the more distant past.
Go ahead — check out the growth rates for your favorite companies and see how they stack up to your expectations.