The market treaded water for most of today, but with stocks steadily trending downward this summer, is it time to buy? Shannon Zimmerman thinks that might be the case for large-cap stocks. He sees a silver lining in the sale prices the market's offering.
In today's Motley Fool Take:
- Hoarding Home Depot
- Shameless Plug: IRA Center
- Apple's Real Rivalry
- Discussion Board of the Day: Apple
- McAfee Finds More Security
- Quote of Note
- More on Fool.com Today
Hoarding Home Depot
To judge by this morning's second-quarter earnings release, no one told Home Depot
Today, we learn that the average Home Depot home improver spent 8.2% more per purchase -- just more than four bucks -- to help push comps up 4.8%. All told, the big orange retailer notched sales of $20 billion for the quarter, 11% better than last year's tally. Earnings per share shot up even more, rising 25% to $0.70 per stub.
If you're interested in investing in companies that know how to deliver for the shareholder, you will probably dig what Home Depot is doing. At the top of the sheets, check out the 2.2% improvement in gross margin. Multiply by $20 billion, and you get an idea of what that can do for the bottom line. Mix in generous stock buybacks, such as the $6 billion recently spent, with another $1 billion on the way, and you have a recipe for reliable investor rewards.
If you need to pick nits, well... SG&A popped up 1.4% this quarter as a portion of revenues. Trimmer operations would have made things even sweeter.
For the full year, management raised its earning guidance from 10-14% to 14-17%. Even after today's 4% pop, shares are priced at about 17 times earnings. OK, that's not a thumping cheap value. But given the firm's solid consistency and opportunities for growth in Mexico and China, investors would be Foolish to hoard a little Home Depot, especially if it can be purchased during the occasional market discounts.
Shameless Plug: IRA Center
You probably want to retire. You also probably want to pay as few taxes as possible. If so, then an individual retirement account (IRA) is for you. Weigh your options in our IRA Center. And while you're there, compare brokers' IRA fees, too. It's one-stop shopping for busy folks like you.
Apple's Real Rivalry
If you go by the headlines alone, it sounds like RealNetworks
RealNetworks announced its Freedom of Choice campaign today, which is a fire sale of sorts, offering song downloads for $0.49 each and albums for $4.99 each. Compared with the pricing for the industry standard -- Apple, iPod, and iTunes services, which recently delivered its 100 millionth download -- Real's offering the equivalent of a two-for-one sale.
Though RealNetworks now expects its upcoming quarterly loss will be wider by a penny related to the campaign, these prices aren't going to be an ongoing business initiative. So, while it's an interesting move, rumors of an all-out price war may be greatly exaggerated.
It's another day that brings to mind that desperate times call for desperate measures, and we've seen some pretty wild attempts in recent history, from rivals such as Roxio
Real's been rabid to rip market share from Apple. Although Real may have gotten some sympathy several years ago for having called out Microsoft
Apple may have garnered 70% of the download market and then rebuffed Real's overtures to play beautiful music together, but that didn't give Real any good reason to -- in Apple's words -- "hack" into the iPod. This seems one in the latest pot shot at Apple, which consumers have chosen over the competition, which also includes Sony
What Real seems to forget is that Apple's products are so darn popular, and current pricing may not be that much of a concern for the downloading public (downloaded albums are still a lot cheaper than CDs, and for some, downloading single songs certainly saves money compared with entire unwanted albums).
So, this campaign may paint Real as a bit of a rebel without a cause. Though yes, it might result in a flurry of Harmony downloads in the near term, the sheer fact that Harmony does work with a variety of players doesn't require loyalty. I'm not convinced Real's plan will further its long-term agenda much -- or take a very big slice of the Apple pie.
Read more on Apple, Real, and music downloads:
- RealNetworks' Sour Apple Note, by Tim Goh
- Apple: 100 Million Served, by Tim Beyers
- Apple Won't Get Real, by Seth Jayson
Alyce Lomaxdoes not own shares of any of the companies mentioned.
Discussion Board of the Day: Apple
What do you think of RealNetworks' latest attempt to swipe iTunes market share? Discuss your views with other Fools on the Apple discussion board.
McAfee Finds More Security
Shortly after we came back from our big vacation overseas in May, my Apple
Fortunately, I only lost a month's worth of e-mail because I back up my data to an external hard drive. But I've learned my lesson. I now back up my data a whole lot more, although still probably not as often as I should.
Indeed, viruses are spreading. There are more than 90,000 classes of computer viruses out there, according to Sophos, a maker of anti-virus software. No wonder researcher Meta Group says that it expects 12% of information technology budgets to be spent on securing computer systems over the next couple of years. With the Department of Commerce estimating $872 billion in gross domestic product from IT last year, services, hardware, and software for security could eclipse $100 billion in 2004 and continue growing steadily.
So you can go ahead and color me unsurprised to hear yesterday that anti-virus software maker McAfee
The deal is the latest in a spree of acquisitions in tech security lately -- even Time Warner's
But yesterday's news interested investors because it shows that McAfee is intent on continuing its recent momentum by buying to complete its product portfolio. Trading at roughly 20 times its expected forward earnings, and 15 times its free cash flow when compared to its enterprise value, McAfee shares are anything but cheap at today's prices. Strong growth delivered from acquisitions such as the Foundstone deal could change that in a hurry.
For more Fool coverage of the virus wars, check out these articles from Alyce Lomax:
- AOL makes "you've got mail!" a more pleasant phrase.
- McAfee's second-quarter earnings were strong.
- Virus writers didn't take a summer vacation.
Fool contributor Tim Beyers still thinks the Mac is much more insulated against viruses than those pesky Windows PCs, but he also thinks you can never be too careful. Tim owns no shares in any of the companies mentioned, and you can view his Fool profile here.
Quote of Note
"If the world should blow itself up, the last audible voice would be that of an expert saying it can't be done." -- Peter Ustinov, British actor and author
More on Fool.com Today
In Time to Buy?, Shannon Zimmerman says that when the going gets tough, the tough go shopping.... Charly Travers offers advice on withstanding the volatility of the biotech sector in Surviving Biotech's Downturns.... In Pay Up for Growth, Legg Mason's Mary Chris Gay shares when to pay for growth and when to sell a stock.
In other news:
- Placing Orders With Your Brokerage
- Don't Marry Until March
- Have Ailing Airlines Found a Cure?
- Sneaky Credit Card Tactics
For a list of all our stories from today, see our Today's Headlines page.