No one can be sure what the future holds, and with so many variables (Greek default, US debt ceiling, unemployment, unrest in the Middle East, ending QE2) any prediction is nothing more than a guess. So rather than wait and see if the markets fall, here are 4 stocks that have already been bears so far in 2011.
PetMed Express Inc.
PETS is one company that can shout from the rooftop, "Lost decade? What lost decade?". The stock price has grown a whopping 2000% since its low in 2002 of $0.73, peaking in 2009 at over $23. The stock has been on a steady decline since then, and now sits at $11.78.
The past 10 years have been great for PETS, as the company has grown sales from just $32 million in 2002 to $231.6 million in 2011, an annual average growth rate of 24.3%. However, pet medicine sales, which are an estimated $45.5 billion business according to the company's investor relations report, is mostly under the control of independent veterinarians. This makes it hard for any other source to gain a strong foothold in the business.
As other companies enter the market, most notably Amazon (NASDAQ:AMZN), the price competition is squeezing margins making it even tougher. Analysts are expecting earnings of only $0.76 this year, down 17% from this past year. The current yield is over 4%, but the dividend has only been paid for 3 years, putting this young company out of the running for most dividend investor portfolios.
Still, a debt free balance sheet and strong cash flows may aid in keeping the dividend afloat, and if this is just short term weakness, now would be a great opportunity to buy.
Target (NYSE:TGT) operates a chain of large format general merchandise stores in the US including; larger SuperTarget stores, and Target.com, its online retailer. In TGT's most recent expansion it is heading northward, and are scheduled to take over 150 Zellers leases in Canada operating them for a time as Zellers, before changing them to Target.
The company, seen as an upscale Walmart (NYSE:WMT) throughout most of America, has a long dividend history with 44 years of consecutive dividend increases. Until recently, the price of the stock kept the yield too low for most dividend investors. However, pricing pressure and decreasing same store sales numbers have created a great opportunity. The price has careened downwards by about 16% since January, and the yield has grown to 2.4%. Fundamentally, Target is a strong company and if its international growth can fuel sales, this may be a good price to stock up on TGT.
Life Partners Holdings Inc.
I can't devote to much time to this company, as I find its business model unappealing. (NASDAQ:LPHI) facilitates the sale of life insurance between sellers and buyers. Essentially, investors make bets on how quickly a stranger will die, and the sooner the better. Not my cup of tea.
Still, if you are interested, it is hard to beat a dividend yield of 20.8%. Although, the company's survival is questionable amid a crumbling stock price, an ethically grey business model, and a CEO (Brian Pardo) who already put one company into bankruptcy, I would stay away from this one.
Last summer, Strayer Education (NASDAQ:STRA), a company that operates post-secondary education centers, was trading at over $240 a share. Today, it is at only $137.48, and the stock has lost almost 43% of its value. Even though STRA had a decent first quarter, with earnings up 6% from 2010 off the back of a tuition increase in January, and increased student enrollment. The recent price slide has brought the dividend yield up to 2.9%.
Though STRA is smaller than some of the other for-profit education companies, STRA only derives 75% of its income from Title IV loans. Keeping itself well below the legal limit of 90% (if a for profit company earns more than 90% of cash sales from the federal government for 2 years, it is ineligible to receive those loans for 2 years..ouch!). And being one of the smaller institutions, STRA has plenty of room for growth.
What's been really hurting the stock price was the preliminary data, released last August, that only 25% of students from Strayer were paying the principal on federal loans. This data puts the school at odds with the heavy push from Arne Duncan and Obama to enact "gainful employment" regulations, that are meant to protect students from for-profit institutions. The legislation was finalized in June of this year, but changes made to the initial proposal make it harder for schools to lose eligibility, and that should help the stock price.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in TGT over the next 72 hours.