Target Stock: A Poor Business Strategy Ahead

Guess what Wal-Mart Stores, Inc. just did in my former university town today? They launched a clearance sale at their Wal-Mart Express mini-location that will be closing down for good this Friday. This anecdote is not location specific. Wal-Mart is in the process of closing all 102 of its Wal-Mart Express locations this year.

Carol Spieckerman, a retailer, offered the most succinct of why this project failed: “Wal-Mart openly acknowledged its struggles to manage everything from pack sizes to back room processes and transportation to urban location. It was faced with operating a model that was more unique that synergistic with its core business. The small-format landscape is also quite crowded with seasoned competitors such as dollar stores, drug retailers, and hard discounters.”

That analysis was perfectly on point. Anything else is just an elaboration of those three sentences. When you hear “Walgreens”, you think about cold beverages and medicine. … Read the rest of this article!

Old-School Blue-Chip Value Investing

The reason why I prefer the type of investing that is conventionally called “growth at a reasonable price” investing is because the ride is enjoyable and time is your friend. If you own a huge block of Nike stock, it doesn’t really matter that the stock has fallen from the $65+ range to the low $50+ range over the past eighteen months because the earnings keep growing at a 12-16% annual rate so it is a near inevitability that the price of the stock will be much higher five, ten, and fifteen years from now.

The favorable advantages of doing absolutely nothing but sitting back and letting the things you own compound were expressed by Warren Buffett in the 2010 letter to shareholders of Berkshire Hathaway:

“Other companies we hold are likely to increase their dividends as well. Coca-Cola paid us $88 million in 1995, the year after we finished … Read the rest of this article!