The 4th of July has come and gone but the 3 and half day trading week sure didn't lack volatility. As expected, many people were on vacation for the week so volume was typically light. That sure didn't stop gold from sustaining its free fall getting all the way down to $1200 per ounce. It wasn't until this week when China reported a higher than expected inflation rate that gold staged a minor comeback. After April's drop in gold prices to $1400 per ounce, it sure did look like gold was setting up a new bottom but I missed that call. Having said all of that I am encouraged by the bump up gold took in the middle of this week.
Monday saw the start of the quarterly earnings reports. Alcoa's earnings beat street expectations as did their revenue after all extraordinary items were factored out. Aluminum prices, like all metals, continue to take a beating on world markets but Alcoa is expecting improving business conditions as our economy continues to scratch out its slow growth in the second half of 2013.
Enough with the commentary, my model flagged a buy for me this week, Staples (SPLS). Everyone knows what Staples is. I won't be surprised if everyone knew where the closest Staples was, too. The street analyst rate SPLS anywhere from Hold to Strong Buy. I've seen target prices for the stock between $17 and $26 per share. My model is projecting a target price of $20 per share and it also put a STOP-LOSS at $15.80 per share.
A quick aside here: A stop-loss is a price point at which you want to sell a stock to either avoid further losses or to lock in gains when a stock stops going up.
So what do I like about SPLS?
The Fair Market Value of SPLS is a bit more than $17 per share against a Book Value of approximately $4 per share.
The SPLS Cash to LT Debt ratio is 1.33. (They have more cash than LT Debt.)
SPLS has a respectable 2.64% yield at the current price level. (SPLS - $16.67 close July 11th, 2013.) SPLS also has increased it's dividend by 10% each of the last few years.
The economy is coming into the time of the year when consumer spending typically increases for the fall school semester and the holidays.
Now here is a little caveat to adding SPLS to the Magic Money Portfolio. Over the last week while I've been writing this entry, SPLS has increased $0.65 per share to $16.67. While this is not a bad price, I like SPLS better between $16.00 and $16.40 per share. With that said, I will add 100 shares to the portfolio and if the price pulls back to below $16.40, I will add more to the position.
07 June 13 - 1000 shrs IAG @ $5.29 per share. (BUY)
13 June 13 - 500 shrs AA @ $8.20 per share. (BUY)
21 June 13 - 100 shrs DUK @ $65.58 per share. (BUY)
28 June 13 - 200 shrs GE @ $23.19 per share. (BUY)
28 June 13 - IAG traded ex-dividend $0.125 per share
11 July 13 - 100 shrs SPLS @ $16.67 per share (BUY)
12 July 13 - IAG Dividend @ $0.125 per share, $125 (INCOME)
12 July 13 - IAG Dividend @ $0.125 per share, $125 (INCOME)
Magic Money Machine Portfolio (12 July 2013)
Cash: $ 27,882.00
1000 shares IAG- $ 4.33 $ 4,330.00
500 shares AA - $ 8.19 $ 4,095.00
100 shares DUK - $ 70.15 $ 7,015.00
200 shares GE - $23.76 $ 4,752.00
100 shares SPLS - $16.73 $ 1,673.00
Total $ 49,702.00
(0.60%)
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