Gathering New Information about Stocks, Health, and Sports

          As Amazon recently reported its quarterly results, which, not only did I predict right on, but surprised many other experts and analysts awaiting a more negative outcome, one of its competitors, Barnes and Noble (BKS), which typically utilizes similar methods in achieving its respective businesses will be reporting earnings shortly as well. With such similar trends and data, you, as a shareholder of this stock should expect to gain similar capital after this recognized bookstore reports its earnings in about two weeks. While the parallelism is perceived as obvious, the truth may actually be a bit surprising.
          In the short term, you should see a very similar trend to what Amazon is currently doing. While I cannot be sure that Barnes and Noble will report results that will boost the share price in the same way it did to Amazon, I have a good feeling that because both corporations are very similar and have reported very comparable trends in terms of share price growth over the last five years, that come November 16th, you should see a nice gain in your capital if you own a piece of this company. Looking at a more detailed approach, like Amazon, Barnes and Noble has posted pretty solid fundamentals during the past two years. It’s true that margins have fallen, but a lot that can be attributed to poor investing and financing fundamentals instead of the more important operational numbers. What I also see as a positive for Barnes and Noble is how it continuously has beaten earnings over the past four quarters. While such may be common to other stocks, with an EPS estimate for this quarter of only negative 0.04, I absolutely, with the advancement of consumer spending and sentiment, coupled with good economic data reported during this quarter, believe that Barnes and Noble will handily beat expectations on the bottom line. Another positive to keep in note, is that while the economy may be slowing a bit in terms of more institutional factors such as in housing, in terms of the consumer, with the recent report that the unemployment rate is at its lowest point in over five years, consumers are going to have more discretionary income to spend, which should push earning numbers even farther for Barnes and Noble over the next few quarters, especially with the Christmas holiday season approaching. The other important indicator that I like from Barnes and Noble is its P/E ratio. Compared to its other competitors of Books-A-Million, Borders, and even Amazon, Barnes and Noble has the lowest P/E ratio out of these respective competitors signaling an undervalued stock ready to possibly break a 52 week high. If are not a shareholder of this company, I would strongly recommend purchasing shares before earnings are released.
          However, with such promise and optimism comes a catch. Yes, it is true that Barnes and Noble is underperforming but in excellent position to excel in the short run. However, in the long run I would not share a similar sentiment. As the nature of Barnes and Noble is a high price selling book store, the reason I argued that the share price may be a good bargain now is because of the current economic situation. When consumers have more jobs and higher incomes, they tend to spend more on luxury goods such as books for pleasure. However, once, and it will happen soon, this economic condition reverses into a slower economic growth state, do not expect earnings from Barnes and Noble to resemble what you may see in the coming months. As a slower economy approaches with the prospect that this company is very volatile in terms of its share price, do not feel optimistic that you will increase your capital gains very fast. Truthfully, around April to about June time frame of 2007, I would actually start selling most of my shares of Barnes and Noble for the reason I mentioned above, coupled with the seasonal displacement stocks usually have during this time.
          Thus, while Barnes and Nobles shows excellent signs of producing a glamorous quarter in the next few weeks, do not be too complacent if you are a long term investor. I say this because more than likely, once Barnes and Noble hits a new 52 week high in the coming months, do not expect such growth to sustain into next year simply due to the inevitable but ephemeral and cyclical nature of the economy. In the short term, however, I absolutely would advocate purchasing shares of this company, if you haven’t already, because there is still money to be made in this current bull market.

-Dennis Biray
November 4th, 2006