14 January 2006

Does the recent dip mean a good time to buy BBBY?

Sorry for the blog hiatus to any remaining readers. I blame the holidays, the flu, and changes at work for my lack of posts. But I was also lacking in inspiration.

As the lethargy and phlegm remnants of the flu fade, I'm feeling the investing juices flowing again. And I'm a mere $300 in savings away from starting my long-awaited portfolio, so let's check out a potential first purchase...

Does the recent hit to Bed Bath & Beyond's stock mean that I should look to pick up some BBBY soon?

Let's take the familiar quick look at SmartMoney competition numbers, as well as Morningstar's grades:

5-year Sales Growth / 5-year Earnings Growth / Net Profit Margin / PEG / ROE / ROA /(Morningstar Growth, Profitability, Financial Health Grades)

Bed Bath & Beyond - BBBY
19.06% - 26.64% - 9.90% - 1.14 - 23.00% - 16.00% (A- A+ A+)

Linens 'n Things - LIN
11.86% - (4.44%) - 1.30% - 2.84 - 4.10% - 2.10% (C+ B- B+)

Willams-Sonoma - WSM
13.76% - 29.50% - 6.10% - 1.29 - 20.70% - 11.90% (B+ A A)

Restoration Hardware - RSTO
9.79% - n/a - 0.20% - 2.97 - 1.00% - 0.40% (B D F)

I buy into the theory that a great time to buy stocks of solid companies is right after a market sell-off. I've previously discussed my awkward acronym on the blog, BNBNRBN, i.e. bad news but not really bad news. Usually, the Movers & Shakers column at MarketWatch.com tips me off on stocks that tank, as well as those that make big moves, stocks that I would otherwise have missed.

After a quick look at BBBY's numbers and its competition, it's clear to me that BBBY is a prosperous and profitable company that had an earnings shortfall that disappointed Wall Street. The numbers still look good to me, with only Williams-Sonoma coming close. However, WSM the stock is not currently on sale like BBBY. The value investor in me likes a discount, much like my wife and I enjoy taking advantage of Bed Bath & Beyond coupons (Note to readers: save expired BBBY coupons, as well as their competitors, since in my experience, they honor them with no fuss. Quite a consumer-friendly business move on their part.)

Looking at the moving averages on the chart atop this post, I will buy some shares of BBBY if the stock stays below $40 by the time I'm ready to purchase. Otherwise, I think I will wait until another BNBNRBN opportunity comes along.

No comments: