Investment theory and analysis - Case Study Example

Investment Theory and Analysis. Nordstrom. John W. Nordstrom was only 16 years old when he boy left Sweden, his home country, to come to New York City In 1887. He arrived in New York with just $5 left in his pocket, and was not even able to speak English at the time. For some years, he worked in logging camps and mines across the United States, but later went north to Alaska, after learning that gold had been found there. After working in the north for about two years, he was able to return to Seattle and invest in a shoe store in 1901. From the beginning, Nordstrom's business philosophy has been based on quality, value, exceptional service, and selection. The company has built a devoted customer base, and has more than 180 stores across 27 states in America. Nordstrom now has a stock market value of more than $12 billion. Company analysis. There was a boost in Nordstrom's market value in November, due to a 4.5% increase of in the company's share value, to $49.62. This increase was something that exceeded investor expectations in various financial departments, and analysts have quickly revised their earnings forecasts, with many raising their price targets for Nordstrom stock. In the first quarter of 1999, Nordstrom repurchased a total of 1.4 million shares valued at approximately $50 million, and the company still has a remaining share repurchase authorization of $270 million. Also, Nordstrom Bank is a wholly owned subsidiary of Nordstrom, Inc, which issues Nordstrom cards. Advantages of choosing Nordstrom stock. Nordstrom is a Company that has acquired mastery of new software technology, and this will lead to continuous improvement in the company's inventory efficiency throughout the holiday shopping season, extending into next year. As Robert Buchanan, an analyst at A.G. Edwards & Sons said after Nordstrom released its earnings, " Nordstrom looks good with regard to having the right software in place and knowing how to use it proficiently." Buchanan, R. from http://seattlepi.nwsource.com/business/187118_nordstrom20.htmlsearchpagefrom=1&searchdiff=11 Nordstrom Earnings per share. The company's Earnings per share have been reported at $0.22. "The Reported Amount reflects a value of $0.02 Per Share of Data Center Relocation Costs." SEATTLE (BUSINESS WIRE) May 13, 1999. Nordstrom, Inc. also reported diluted earnings per share of $0.22 for its first quarter, ending April 30, 1999. Nordstrom's Earnings per share increased by 33%, to 52 cents a share, about a penny more than the analysts at Wall Street had expected. There has also been an increase in sales to about 12% in the fall, amounting to about $1.87 billion. Sales at locations open at least a year (same-store sales), have also increased to an impressive 11%. Nordstrom's Catalog sales gained the most, increasing as much as 30%, followed by sales at the company's discount stores, which increased by about 11%, and sales at the full-line department store, which went up by nearly 9%. This reported amount reflects a value of $0.02 per share of non-recurring costs related to the resettlement of Nordstrom's data center from Seattle, Washington, to Denver, Colorado. Earnings per share also went up by 4.8 percent, above the $0.21 recorded between January and April last year. The company's Net earnings dropped by 2.5 percent, as compared to Net earnings of $31.5 million in the prior year. Company sales also dropped by 0.1 percent, from last year, and totaled $1.0 billion. Nordstrom Historical Stock Chart. Other relevant information Nordstrom, Inc. has an Internet presence at http://www.nordstrom.com, and the company's total square footage is 13,813,000. The company's Chairman and Chief Executive Officer, John Whitacre said "We were neither satisfied nor surprised with our first quarter performance. While we have been successful at paring inventory levels, which had burgeoned recently, we must now refine our merchandise mix to better align it with customer needs." Whitacre, J. from http://findarticles.com/p/articles/mi_hb3070/is_199905/ai_n13093474 As of April 30th, 1999, retail store inventory per square foot declined 7.1 percent and total inventory declined 4.7 percent, both from year-ago levels. Gross margin increased 0.9 percentage points to 33.8 percent of sales in the 1999 first quarter. For the quarter, comparable store sales declined 2.6 percent. (from http://seattlepi.nwsource.com/business/187118_nordstrom20.htmlsearchpagefrom=1&searchdiff=11 ) Nordstrom Stock Chart in June 2007 MasterCard. MasterCard Inc. was founded in 1966 and now has its headquarters in Purchase, New York. The company advances commerce globally by providing the vital economic link that is needed among financial institutions and businesses all over the world. MasterCard is involved in the development and marketing of payment solutions, and handles more than 16 billion transactions per year. The company also avails financial institutions and customers of industry-leading analysis and consultation services. MasterCard became a public company in May 2006, and the company reported a quarterly profit of $41 million (at 30 cents per share) and a loss of $53 million (at 39 cents per share) last year. Last period, MasterCard reported a profit of $41 million (at 31 cents per share), excluding the effects of litigation settlements. Company analysis MasterCard Inc. and its various subsidiaries, operates as a company that offers payment solutions to users. The company handles processing of payment transactions, development and marketing of payment solutions and consultation services to its customers and other merchants. The company also facilitates the clearing, authorization, and settlement processes of these transactions, as well as providing customers with consumer debit and credit and prepaid programs, stored value programs, commercial payment solutions, and non-contact payment solutions, research and consulting services. MasterCard also licenses and manages payment card brands, such as MasterCard, Maestro, MasterCard Electronic, and Cirrus. MasterCard's services are currently used by about 25,000 financial institutions, all over the world. Below are some of the reasons why MasterCard stocks are preferable: 1) The company has the ability to drive finance, trade and commerce in markets all around the world 2) The company is able to leverage its substructure with a view to delivering innovative payment solutions to its customers in financial institutions, and to governments the world over. 3) MasterCard is able to implement modern payment programs, both in countries with developing economies, and countries with an advanced economy. 4) The company has been successful in dislodging the various paper-based forms of payment 5) MasterCard also has a strong capital position and a strong commitment to deliver value to its shareholders. MasterCard Earnings per share. On February 6, 2007, MasterCard's Board of Directors met, and decided to increase the quarterly cash dividend paid to shareholders of the company. This increase includes all holders of the company's Class A common stock, and also MasterCard's Class B common stock. Chris A. McWilton, MasterCard's chief financial officer said "We are pleased that the success of our business and the strength of our capital position has allowed us to increase our dividend, further demonstrating our commitment to drive shareholder value," McWilton, C. A. (from http://seattlepi.nwsource.com/business/187118_nordstrom20.htmlsearchpagefrom=1&searchdiff=11 ) Other relevant information MasterCard's operating margin increased by 2.9 percent to 19.5 percent in 2006, and investors had to unload the company's stock, which doubled in value this year, reaching a record $118.07 during morning trade, and dropping to $11.14 (9.71 percent), to close at $103.60 on the New York Stock Exchange. This is the second quarterly result since the company went public. MasterCard's initial public offer of $2.39 billion was used to loosen up the holdings by the various banks in the united states, which controlled the company, and it now regards mutual funds like Fidelity, and hedge funds such as Atticus Management LLC as its largest investors. Conclusion. MasterCard's ability to adjust to changing industry trends, the company's technological and payment program innovations, its resolution of regulatory actions, legal proceedings, changing market dynamics and other risk factors, makes the company's stock a solid investment for any investor. References. Jordan, B. D, Miller, T. (2006). Fundamentals of Investments. 4th edition. Malkiel, B. G. (2007). A Random Walk Down Wall Street. from http://finance.yahoo.com from http://findarticles.com/p/articles/mi_hb3070/is_199905/ai_n13093474 http://seattlepi.nwsource.com/business/187118_nordstrom20.htmlsearchpagefrom=1&searchdiff=11 SEATTLE (BUSINESS WIRE) May 13, 1999. from Read More