Target Stock’s Extended Share Repurchase Plan

Target Corp. does not, and has not, grown its profit. This year, it is expected to make about $2.4 billion. That is the same amount of profit that Target earned in the recession year of 2009. As recently as 2015, Target was earning $2.9 billion per year in profits. These downticks in profitability are even more concerning when you consider that Target is perpetually opening up new stores—the implication being that the same-store sales profits are declining at a greater rate than the amount of new profit generated by the new locations.

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Investment Lessons From Stein Mart, Inc.’s Fall

When I reviewed Stein Mart’s business model in recent years, I was unimpressed on both quantitative and qualitative grounds. Quantitatively, I thought it was embarrassingly poor that Stein Mart only managed to earn $27 million in net profits at its cyclical high over the past five years. For a company with 300 stores that consume gobs of square feet, a net profit figure of only $80,000-$85,000 was terribly insufficient.

And the above-referenced numbers refer to Stein Mart’s 2016 highs. When Stein Mart’s profits evaporated and turned to an $11 million loss this year, it was clear that the business model was seriously defunct.

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Municipal Bonds Contain New Investor Risks

For nearly all of its history, municipal bonds have been regarded as one of the safest investments that one could make. After all, general obligation government bonds are backed by the taxing power of a given jurisdiction. If you buy a United States bond, your likelihood of being paid interest and later your principal is based on the ability of the United States government to tax over 300 million. If you buy a bond issued, say, by the state of Texas, your likelihood of being repaid is determined by the Texas state government’s ability to tax 27 million people.

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The Vanguard Total Bond Index Owns No Long-Term Debt

For a lot of wealthy investors that look to stockpile or inventory their wealth, either as an emergency fund or dry powder, the Vanguard Total Bond Index (VBMFX) is a popular choice because it is loaded with nothing but U.S. government-issued debt as well as some AAA and AA bonds.

It is distinguishable from a money market fund because it owns most of the same debt instruments, except for longer durations. If you purchase those $1 shares in a money market fund, you are making the safest short-term investment possible because it is nothing but U.S. government debt that matures in thirty days or less. As long as the U.S. government does not imminently dissolve its obligations, you are getting paid. That’s why the interest collected is often less than a tenth of one percent.

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The Amazingly Neglected Vanguard U.S. Growth Fund

Think back to 1959. The United States was expanding from 48 to 50 states with the inclusion of Alaska and Hawaii. Gas cost a quarter per gallon. A brand new Ford car would set you back $2,000. The Boeing 707 was first mass produced. American commercialism was falling in love with Mattel’s new Barbie doll creation, becoming the most sought after Christmas gift for young American girls. And in Cuba, Fidel Castro—boo, heckle heckle—was rising to power.

Also of interest, but rarely discussed, was the birth of one of America’s stodgiest Vanguard mutual funds that receives almost no attention but has nevertheless delivered exceptional risk-adjusted returns and made any long-term fundholders rich. I am referring to the rarely analyzed Vanguard U.S. Growth Fund (VWUSX). It’s funny—Vanguard has correctly earned a reputation as the powerhouse of the passive investing industry, but it has quite a few actively managed funds that serve as testaments to the advantage of developing the discipline to pick and choose a collection of individually assets with above-average growth characteristics.

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