5 Valentine’s Day Value Stocks – Revisited
Evan is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
I love this time of year! Valentine’s Day is the time we celebrate the relationships held near and dear to our hearts and is the traditional holiday of love. One way that many people choose to express their love is through buying treats, flowers, jewelry, and assorted gifts for their special someone.
In a strictly business context, Valentine’s Day provides a large boom for companies who specialize in the aforementioned sectors. Fellow Motley Fool writer Arthur Pinkasovitch, writing on Valentine’s Day 2012, recommended “5 Valentine’s Day Value Stocks” for the investor looking for a way to profit off of the Valentine’s Day industry. Are these five companies delivering on the other 364 days of the year, or are they simply “one-dimensional” stocks? One year later, as we near Valentine’s Day 2013, let’s take a step back and examine these five companies and how they fared.
American Greetings Corporation (UNKNOWN: AM.DL) is the world’s largest publicly traded greeting card company. The business manufactures greeting cards, party goods, gift packaging, stationery, and giftware, among other various goods.
As Forbes writer John Dobosz noted, American Greetings is in a position of relative financial strength even though the digital revolution has taken the world by storm. American Greetings has a full slate of products that also deal with other holidays and special occasions, so the company is not overly dependent on Valentine’s Day sales. But, a look at the numbers shows that American Greetings only gave modest gains at best over the duration of 2012, and might not be the best option for 2013.
The company’s stock has appreciated from a Valentine’s Day 2012 close of $15.04 to a Feb. 8 price of $16.07. But, in between that time, the stock has fluctuated wildly from $12 to $17. According to American Greeting’s Securities and Exchange Commission (SEC) filings, while American Greetings did report $1.695 billion revenues generated for fiscal year 2012, the company reported a net income of negative $57.198 million.
The powers that be at the company are planning to take the company private, which indicates that the company is engaging in a “rebuilding” phase. American Greetings had a slightly decent fiscal year 2012, but it most likely won’t produce sustainable quarter-over-quarter gains.
1-800-Flowers (NASDAQ: FLWS) sells flowers, chocolates, fruit baskets, and other types of plants and treats. 1-800 Flowers’ product line does admittedly cover a lot of the Valentine’s Day bases. On the surface, 1-800-Flowers seems to be a potential good investment to make. However, the company’s performance over the previous few years should give investors cause for concern.
While the stock has gained an incredible 67% in 2012 and is up another 7% so far in 2013, the company hasn't posted a profit for the quarter including Feb. 14 in four years. And, in four of the past five years, 1-800-Flowers' shares have lost value between the week before Valentine's Day and mid-March. As of now, although 1-800-Flowers was a relative success in 2012, I’d stay skeptical of the stock until the company can actually back up the stock’s rise with concrete results.
Limited Brands (NYSE: LTD) is an American fashion retailer mostly known as the manufacturers of Victoria’s Secret and Bath & Body Works related products. The company’s stock has stayed consistently at around the $45 mark since Valentine’s Day 2012, but the prospects for Limited Brands are comparatively brighter than those of American Greetings or 1-800-Flowers.
Limited Brands opened up 2013 strong by boosting sales by post-holiday deals, and several respected Wall Street institutions have maintained their support for the stock. However, Limited Brands is struggling to expand internationally, as 80% of their sales are derived solely from the United States. Overall, Limited Brands had a good 2012, a great start to 2013, and has good appeal beyond Valentine’s Day. But the business needs to pursue the international markets more and will have some problems down the road if they do not do so.
Zale (NYSE: ZLC) is a specialty retailer of fine jewelry in North America. “Diamonds are a girl’s best friend” on Valentine’s Day, and Zale has some good prospects for growth that should make investors cautiously optimistic.
Zale has not been able to generate revenues in the past four years and had net revenue of negative $1.9 billion as of July 2012. The company's earnings actually declined 78% in the past five years, and Zale’s shares, sitting at around $5 per share, are well below the former glory day levels of around $30 prior to the start of the most recent American recession. However, Zale is expanding its market share somewhat and reported holiday gains. Also, on Valentine’s Day of 2012 the stock was only at around $3--today it's at $5. Therefore, the long-term prospects for Zale are quite uncertain, but for the short-term Zale appears to be picking up the pieces from the global recession and moving forward.
Brinker International (NYSE: EAT) is the company behind Chili’s Grill & Bar (Chili’s) and Maggiano’s Little Italy (Maggiano’s) restaurant brands. Restaurant stocks, in general, are not investments for the faint of heart. The restaurant industry has particularly fierce, grueling competition, and Brinker International has some issues that need to be improved in order for the company to become more competitive.
Unlike Limited Brands, Brinker has a well-established worldwide market presence and has effectively expanded into worldwide markets without spending huge sums of money. This approach is easily replicable by competitors, but it does give a solid return on investment for Brinker.
However, Brinker has a substantial debt load to shoulder and faces erratic earnings. In fact, Brinker has seen its revenues shrink almost every year since 2008, according to financial reports from the company. The restaurant industry as a whole is subject to rising food costs and global economic uncertainty. Overall, Brinker International has got some good things going for it: great brands, a good international presence, and an effective business strategy. On the other hand, the company hasn’t shown much significant growth over the past five years. As of now, there are probably more stable restaurant options out there than Brinker International.
When examining different companies, it is important to read between the lines and not judge a company’s entire performance over only one holiday such as Valentine’s Day. One should not get caught up in short-term euphoria or a shortsightedness of long-term goals and profitability. However, Valentine’s Day, as well as other holidays, provides investors with an opportunity to gain from short-term bumps in stock prices. Holiday sales do provide us a glimpse into how a company might fare for the other times of the year. When looking at Arthur Pinkasovitch’s five Valentine’s Day stock recommendations he made on Valentine’s Day 2012, we can observe mixed results. If an investor did buy all five Valentine’s Day value stocks on Feb. 14, 2012, his portfolio would have realized some gains, but that might not hold true during 2013. Overall, American Greetings, 1-800-Flowers, and Brinker International are most likely going to stay locked in mediocrity for the near future, whereas Limited Brands and Zale actually do have some potential to grow and become Valentine’s Day treats for investors.
EvanBuck has no position in any stocks mentioned. The Motley Fool owns shares of American Greetings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!