Feeling fatigued, undernourished, and anemic after one of the worst Septembers since the Great Depression, U.S. stocks headed straight to the drugstore today to dose up on vitamin C and iron. Walgreens was almost empty, although David Hasselhoff was spotted buying a two-gallon jug of fruit punch Gatorade and a jumbo-sized bottle of Advil.
Anybody got a life preserver?
In today's Motley Fool Take:
- Cold Weather, Hot Markets?
- Quote of Note
- Walgreens Needs Vitamins
- Shameless Plug: TMF Money Advisor
- Save Another $100 for Retirement?
- Disney Fills the Gap
- Discussion Board of the Day: Gap
- Quick Takes: Tyco, Wal-Mart, Liz Claiborne , more
- And Finally...
Historically, September has been a sorry month for the markets -- the worst, in fact. And, sure enough, it looks like we'll close it out about 11% poorer in the S&P 500 index. But there's some good news for those who believe in historical trends and the seasonality of stock performance.
Dan Sullivan, publisher of The Chartist newsletter, ran some numbers and found what can only be called an amazing historical performance gap between two six-month periods: May through October and November through April. Over the past half century, money invested in the S&P 500 index at the beginning of May and sold at the end of October -- repeating the process every year -- would have returned only a total of 35%. The November through April time period, however, yielded 3,180%.
Put another way, it seems almost all of the market's average annual 10% returns occurred during the latter time period, while investors were just running in place during the former.
It's hard to say why things have worked out this way. The Washington Post's James Glassman says it might be tax-related, or just a quirk. We tend to go with the "quirk" explanation, even though the overall performance gap is so large. If there were a solid reason for the differences, it would likely be apparent by now. One thing is for certain, though. If there is a reason behind the seasonality, arbitrageurs will jump in and erase any advantage that might have been gained.
Our take: Rather than playing games and trying to time the market, we still prefer to stick with our Foolish principles of finding good businesses at good prices, and buying with the intention of holding for the long term.
"Health is not valued till sickness comes." -- Thomas Fuller, Gnomologia, 1732
Ouch. Shares of the country's biggest drugstore chain, Walgreen Co.
For its fourth quarter, earnings per share were $0.24, a penny shy of the consensus number and ahead of the year-ago number by $0.03. Sales were up in the quarter 15% to $7.2 billion. Net income improved 14.2%.
The issue with Walgreens can be boiled down to a single word: competition. And we're not talking about rival drugstore chain CVS
To counter, Walgreens has spent the last year heavily promoting its so-called front-end items. They're the snacks, makeup, and other goodies it hopes customers will grab when they buzz in to get a prescription filled. Its front-end merchandise accounts for 40% of its sales, but the key is that they're much higher-margin sales than are prescriptions.
Same-store front-end sales for the year only grew an anemic 1.7%, though, in contrast to 16.3% comps growth in prescriptions. Can we get an iron pill over here? Walgreens is obviously having a difficult time convincing customers to shop for anything other than prescriptions in its stores.
It is also trying to bolster its competitive edge by opening lots of new stores. Many of the new, convenient locations operate 24 hours a day. The company has no debt and is financing its expansion through cash from operations, so that's a plus.
It's not going to get any easier for Walgreens to compete against one-stop shops and grocery stores, though. Given the choice, wouldn't you rather stop once than multiple times? It has to figure out a way to make sure customers feel stopping in its stores is not an added pain but a bonus.
But, hey, the company did manage to increase its sales for the year by 16.5%, no small feat in the current retail environment. Can they keep it up? With a stock priced at roughly double its earnings growth, uncertain investors should applaud from the sidelines.
There's no better independent help for your financial affairs than TMF Money Advisor. It gives you all the tools you need to plan ahead and -- more importantly -- take action to secure your financial future.
If you socked away an additional $100 a month starting today, what will that buy you in retirement? Would you be able to join a ritzier country club? Will it be enough to cover groceries in your golden years? Would it pay for the mortgage on a vacation home?
We can't know exactly what today's savings will purchase decades hence, but from a few assumptions and calculations, we can get a rough estimate. Let's start with the assumptions:
- A rate of return: Stocks have historically returned an average of 10% to 11% per year, and bonds have returned 5% to 6%. Will they perform similarly in the decades to come? Who knows, but when it comes to financial planning, it's best to use conservative estimates.
- Years invested: How far away is your retirement?
- A rate of inflation: It's handy to know that investing $100 a month for 20 years and earning 8% will result in $60,000. Unfortunately, though, 60 grand in two decades will not buy what it does today (just as $60,000 in 1981 is worth $29,000 in 2001 dollars). Inflation runs, historically, between 3% and 4%.
- A withdrawal rate: Once you retire, how much can you take from your IRAs and be reasonably sure you won't outlast your money? Most studies conclude that a safe withdrawal rate ranges from 4% to 6% of a retiree's portfolio. Withdrawal rates above 5% increase the probability that a retiree will go broke.
Now, let's run the numbers.
- Open this calculator.
- Fill in the blanks. Enter zero in "Amount You Have Invested," since we're looking at additional savings. Also, enter zeroes in the tax blanks, since we'll assume you're contributing to a tax-friendly IRA.
- Click the "Results!" tab, and then multiply the result by 0.04 for a withdrawal rate of 4%; 0.05 for 5%; and 0.06 for 6%.
- Divide that amount by 12 and -- voilà! -- you get an estimate of monthly retirement income attributable to increased savings now.
Assuming an 8% annual return, 3% inflation, and 5% withdrawal rate, someone who is 20 years from retirement might reap an extra $168 (inflation-adjusted) in monthly retirement income from saving an additional $100 a month now. If you have 30 years until retirement, an invested Franklin now could provide an extra $338 (again, in today's dollars) in retirement.
So what are you waiting for? Up your savings today, and your retired self will thank you for the food, golf, and/or beachfront property.
See, Pressler ran Disney's park and resort operations, and few things stir up a Disney newsgroup tempest more than discussing how Pressler's watch was full of off-the-shelf ride additions and gutting popular attractions for the sake of gift-shop space.
Pressler has proven to be a shrewd cost cutter and a retail enhancer, dating back to when he helped grow the Disney Store concept. So while Disney fans might wonder what made Pressler such a hot commodity in recent months, the fact that he was on the shortlist to take over AOL Time Warner's
He has likened Disney to a big retail location. The way merchandise kiosks and gift shops at attraction exits popped up at the Disney parks during his tenure, it's easy to believe it, too. He won't be shoehorning water rides into Old Navy stores, that's for sure. But while Pressler found easy prey with a smitten Disney audience, Winnie the Pooh khakis and Goofy painter pants won't cut it in the house that Drexler built. It's a challenge that Pressler will no doubt relish, hoping to get the last laugh over Disney enthusiasts who figured that they just lucked out in passing the Old Maid card to Gap.
Disney wasted no time in finding a replacement for Pressler. Over the weekend, it was announced that Euro Disney chief Jay Rasulo would be promoted to Pressler's post. Euro Disney? Uh-oh. Park fanatics might feel like they just fell out of the quality-shredding frying pan and into the fire sale, but Rasulo worked up the ranks the old-fashioned way. You can't pin Euro Disney's earlier failures on him, since he had been heading up the subsidiary for only the last two years.
One thing that both Pressler and Rasulo have going for them: They're inheriting franchises with a lot of pessimism priced in. Gap? Disney's theme parks? Just a couple of years ago, they were globally admired growth operations. It's a new slate now. Let's see if they earn their promotions.
Remember when Gap was denim heaven? Or when Old Navy navigated the retail waters as Gap's value chain seamlessly? What will it take to get Gap back to the brink of greatness? It can't all be riding on Morgan Fairchild, right? All this and more -- in the Gap discussion board. Only on Fool.com.
The scandal ripple effect continues to spread. As probes into Tyco's
Things could be worse in the semiconductor industry. It's not experiencing breakneck growth, as it has in the past, but the World Semiconductor Trade Statistics group has reported that global semiconductor sales increased by 2.2% to about $12 billion in August, over July. August's sales were up 14% over year-ago levels. Sales typically jump in September, as PC makers buy more, preparing for eventual holiday sales.
Overall, though, the economy isn't hopping. Even retail superpower Wal-Mart
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