Celebrating our 10th anniversary, all month long we've brought back some classic Fool columns -- from Bill Mann's Worst Column Ever to David Gardner's ode to buy-and-hold to today's 11 Rules to Stock Picking. We hope you've enjoyed the stroll down memory lane as much as we have.
We'd like to think you'll be sticking around with us for the next few decades, but if you ever wanted to predict the future of The Motley Fool, here's your chance: Take our poll on the main page.
In today's Motley Fool Take:
- What's Lifting Netflix?
- Shameless Plug: Motley Fool Stock Advisor
- The Pulse of Tech Spending
- Quote of Note
- Chico's Keeps Chuggin'
- Discussion Board of the Day: Crafty Fools
- Quick Takes: Western Digital, Nanophase Tech., Debs Shops, more
- And Finally...
What's Lifting Netflix?
On no news, shares of online DVD-rental operation Netflix
The stock market has been weak over the same period, so why the ascent?
First, a strange rumor was floated that Wal-Mart
Just the same, the crazy rumor may have helped the stock start to move, but the ultimate rocket fuel pushing it upward is probably short covering -- a bona fide "short squeeze." As of August 8, nearly 8.3 million shares of Netflix were sold short (meaning borrowed from a broker and sold in hopes of a price decline). This means that 50% of the company's available shares were sold by short sellers and need to be repurchased, creating eventual buying pressure.
As of July, the short interest on Netflix was even higher, so already some buying from capitulating short sellers has helped the stock move upward. Plenty of potential buying pressure remains. The amount of short interest on the stock equates to 12.12 days of Netflix's average daily trading volume -- high enough to place it seventh on the market's list of most heavily shorted stocks as a ratio to average daily volume.
This means that should good news arrive, or if momentum keeps pressing the stock to new highs, many more short sellers might start closing their positions and the stock could see many more days of higher-than-average volume and buying pressure.
Shameless Plug: Motley Fool Stock Advisor
Here's another interesting fact about Netflix and TiVo. Both are among David Gardner's top picks in David and Tom Gardner's Motley Fool Stock Advisor. Tom has a thing for value -- so does David -- but, of the two, he's more inclined to grab hold of a live one. If you're curious, Netlix and TiVo are up 39.35% and 11.89%, respectively, since being recommended in Stock Advisor.
The Pulse of Tech Spending
The pulse of technology spending remains weak. That's the take-away from the latest results out of Tech Data
Tech Data's second-quarter results showed modest top-line improvement, albeit without any positive follow-through on the earnings line. Sales of $4.2 billion were 4.6% higher than the year-ago quarter and ahead of analysts' consensus of $4 billion. Earnings, before special charges, came in at $0.34, down 43.3% from last year's Q2 and below the analyst forecast of $0.36.
Even the positive sales growth deserves an asterisk, however, as it was the result of currency gains in Europe. Sales in Europe (52% of total sales) were higher by 24.1% on a reported basis, but up only 2.8% on a local-currency basis. In addition, sales in the Americas region (48% of total sales) were down 10.8%. In other words, had it not been for currency gains in Europe, Tech Data's sales would've declined by about 3.7%.
Drilling down, Tech Data's operating margin was whittled to a measly 0.7% from 1.4% a year ago. Management cited competitive pricing as a factor behind the margin squeeze. In addition, the company was forced to increase the scope of its workforce reduction plan beyond the 800 layoffs announced in June, resulting in additional charges.
The ugliness washed over onto the balance sheet, as well. Net debt (debt minus cash) was higher at $341 million vs. $192 million at this time one year ago. One additional yellow flag is that inventory increased 15.3% year-over-year, which is substantially faster than sales growth over the same period.
Is this the picture of an improving technology landscape? It seems not. Nevertheless, in a stretch for optimism, Tech Data's management noted "improving market conditions... in the Americas during the second half of the quarter." That, however, was tempered by its outlook on Europe, which they said, "may impede our short-term potential."
If any company has a read on technology spending, it's Tech Data. Its $4 billion in quarterly IT sales are not far behind Cisco's
Quote of Note
"Not everything that can be counted counts, and not everything that counts can be counted." -- Albert Einstein
Chico's Keeps Chuggin'
By LouAnn Lofton (TMF Bling)
The company targets a very attractive demographic: women between the ages of 35 and 55. They're not as fickle as teenagers, so Chico's won't typically run into significant fashion mistakes, like a Wet Seal
Chico's delivers consistently to both customers and investors -- as it just did with its second-quarter report. This is one retailer whose business doesn't suffer from seasonality; it does well all year round.
Sales for the quarter ended August 2 shot up 38.7% to $173.4 million. Same-store sales bounced ahead by 14.6%. Net income grew to $24.5 million -- a whopping 49.3% jump. Earnings per share expanded to $0.28 from $0.19.
The company's growth prospects remain Chico's hook with investors. It only has 418 stores today, having added 40 new ones so far this fiscal year. It intends to open at least 30-35 more this year. It also recently made an acquisition (which will close in the third quarter) of The White House, a small, privately held retailer.
Best of all, Chico's is funding this expansion internally, through the cash it generates from operations. (It will use a little stock for its acquisition, but not much compared to the cash it's shelling out.) It has $141 million in cash and marketable securities sitting on its balance sheet, so moolah isn't a concern.
Chico's is a well-run company, with growth aplenty ahead of it. Given that, its valuation of about 34 times trailing earnings is understandable.
Discussion Board of the Day: Crafty Fools
Ever wanted to make a quilt? Does a right to bear arms mean that you are handy with a glue gun? Michaels Stores posted some pretty pretty earnings today. What's your favorite arts and crafts store? All this and more -- in the Crafty Fools discussion board. Only on Fool.com.
Shares of Nanophase Technologies
Teen clothier Debs Shops
The Commerce Department revised its estimate of Q2 GDP growth upward from 2.4% to 3.1%. The folks over at Labor said new unemployment claims climbed 3,000 to 394,000, last week. Not to be left out, the Conference Board chimed in, saying that July's help-wanted advertising stayed close to a 40-year low.
Our illustrious Jeff Fischer seems normal... except for that growing obsession with the number 10. Today, Jeff brings you 10 Changes in 10 Years. He'd probably tell you that it's this whole Motley Fool 10th anniversary business, but don't buy it. After all, how do you explain today's 11 Rules of Stock Picking, or Rick Munarriz's death-defying Duel: Gap vs. Abercrombie & Fitch? OK, that last one doesn't even make sense; but then, who reads this far anyway?
Bob Bobala, Robert Brokamp, Paul Elliott, Mathew Emmert, Jeff Fischer, Tom Jacobs, LouAnn Lofton, Bill Mann, Selena Maranjian, Rex Moore, Rick Munarriz, Matt Richey, Reggie Santiago, Dayana Yochim