2-Star Stocks Poised to Plunge: Family Dollar?
By
Brian D. Pacampara
May 20, 2009
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Based on the aggregated intelligence of 130,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, discount retailer Family Dollar Stores (NYSE: FDO) has received a distressing two-star ranking.
With that in mind, let's take a closer look at Family Dollar's business and see what CAPS investors are saying about the stock right now.
Family Dollar facts
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Headquarters (founded)
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Charlotte, N.C. (1959)
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Market Cap
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$4.35 billion
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Industry
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General Merchandise Stores
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Trailing-12-Month Revenue
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$7.21 billion
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Management
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CEO Howard Levine (since 1998)
COO James Kelly (since 2006)
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52-Week Price Change
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50%
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Competitors
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Wal-Mart Stores (NYSE: WMT)
Dollar Tree (Nasdaq: DLTR)
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CAPS members bearish on FDO also bearish on:
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Bank of America (NYSE: BAC)
JPMorgan Chase (NYSE: JPM)
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CAPS members bullish on FDO bullish on:
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General Electric (NYSE: GE)
Johnson & Johnson (NYSE: JNJ)
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Sources: Capital IQ, a division of Standard & Poor's, and Motley Fool CAPS.
Over on CAPS, some 14% of the 164 All-Star members who have rated Family Dollar believe the stock will underperform the S&P 500 going forward. These bears include starrider78 and giftofgod, both of whom are ranked in the top 6% of our community.
Last month, starrider78 predicted that low-enders would be long-term laggards: "In the short term, this stock will outperform. However, as the economy improves in the next year or so, consumers will switch their focus to higher-end stores."
In a pitch from a month earlier, giftofgod echoes that bearishness:
I have to rate this one as an underperform at this point. I am seeing many signs that the economy is beginning to stabilize and this one is beginning to look overbought. I did some research several months ago and believe that while Family Dollar's income is growing, there were many negatives buried in the financials. Turnover and profit margins were much lower than Dollar Tree. On the other hand, I believe even the Tree is overbought and expect the fruit to be smaller this year. This assessment may be outdated, and I hope I am wrong. At least do your homework on this one.
What do you think about Family Dollar, or any other stock for that matter? Make your voice heard on Motley Fool CAPS today. More than 130,000 investors are waiting to hear what you have to say. CAPS is 100% free, so simply click here to get started.
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