- When and how you should buy Whole Foods; and
- the compromise that needs to take place on the fiscal cliff.
How to Play a Selloff Posted at 7:23 a.m. EDT on Friday, Nov. 9 You can go back to stocks of companies that have done well that got hammered anyway. You can decide to start picking at stocks you have been waiting for to come down, the preferred way of Action Alerts PLUS. But the one I want to focus on this morning is to look at stocks of companies that are doing terrifically, but they simply got too expensive. Consider the case of Whole Foods ( WFM). Here's a company that reported 8.3% comparable sales numbers, one of the highest of all the companies I follow. It has a huge growth path as it only has 342 stores with the ability to have as many as 1,000 before it starts cannibalizing itself. It remains a revered institution with a Good Housekeeping seal of approval aspect that amazes while at the same time it has been able to close the price gap between "regular" supermarkets and itself to the lowest level since it came public. > > Bull or Bear? Vote in Our Poll Best of all, it is spewing cash and has the least-stretched balance sheet in the business, one that allowed the board to raise its dividend to 20 cents from 14 and to continue to buy back shares. There's only one problem: It has a price-to-earnings ratio of 31. In this environment, where people are selling anything that's not nailed down, where Whole Foods represents a huge capital gain and therefore a giant tax hit next year if nothing is done about the fiscal cliff, Whole Foods becomes Public Enemy No. 1 for the taxable investor. There's just too much gain not to take. So what do you do? You figure out, OK, where would Whole Foods be a gift? At what price would a 15% grower that can grow for years and years be regarded as cheap? What would you pay for the roughly $3.00 that the company can earn next calendar year?
Fonzi vs. Clint Posted at 7:15 a.m. EDT on Thursday, Nov. 8 Which is more realistic, conjuring a a Happy-Days-Are-Here-Again Democratic Party or expecting the Outlaw Josey Wales part of the Republican party to vanish? Right now I would say the next 1,000 to 2,000 Dow points rest on these curious visions of the future. Let me explain. First, there's some amorphous talk out there that the president, in the second term, will become more hospitable to big business, to the trigger pullers, to the corporations who have not had his ear. The idea is that there are enough companies out there that want to break bread with the president and there's enough give to the president in his second term that a new rapport, a new friendship is about to break out. Somehow, that Happy-Days-Are-Here-Again skein of thought is in the ether and I have to tell you I don't understand it at all. Why does Obama have to compromise? What did he do to have to make peace or break bread with anyone? He won this victory by appealing solely to his constituency, which is growing much faster than the Republicans' constituency. I see him going the opposite. Big business doesn't want to play ball with him? To heck with them. Banks and bankers gave tens of millions of dollars to defeat him? Forget about them. Bury them, even.