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Saturday, July 07, 2012

Build Your Own Case Study: Barnes and Noble (BKS)


I am good with numbers but unfortunately I am behind the 8 ball this year when it comes to posting my thoughts.  I've kept busy doing a lot of research to maintain a thoughtful blog.  Based on feedback you'll notice some changes to the site. First, many people will be happy to know that we've responded to your calls for any easy way to know what stocks I'm interested in. I developed a quarterly 'Subscription Service' to highlight long-term value stocks.  I continue to appreciate the feedback and the questions and we will definitely explore posts about socials issues, retirement, and life/wellness in the future.  They'll probably have some sort of financial bend to them so I won't stray to far away from the roots.

I want to talk about how to invest and why we all can do it.  I was just relaxing after taking in a couple of "Mad Men" episodes on Netflix and noted that I should revisit some of my old writings.  I flashed back to my thoughts earlier in the year in the posting "Companies Watch". I wrote the following about Barnes and Noble (BKS):

Barnes and Noble – I am a sucker for stocks on the decline and Barnes and Noble is showing up on my radar. The other day is dropped roughly 20% on news that they were changing their future outlook lower.  That is never good and investors let them have it.  BKS even mentioned making changes such as spinning of their NOOK business.
Price: $11.65 

If you noticed on January 12th, I brought BKS to your attention because it was a large company that's going through some tough times.  These companies can be good investments if you keep a level head and strong stomach.  I want to show you how I built a case study and how you can build yours. 




Things to Do:
1. Identify stocks that are need further analysis and write their pros and cons down.
2. Determine if the price is right by looking for discounts or mismatches in the prices.
3. Figure out what the price will be in future...think long term.  
4. Research the company to find out what and who supports your view of this stocks. This could range from charts, to investors to new articles.
 5. Stick to your guns and only buy the stock when the price is right.
6. Key a watchful eye out for strategic events that could tell you to buy more or sell the stock.

See how it might work, case study for BKS:
1. BKS 
Pros: Borders is gone, Nook/readers are hot right now
Cons: Amazon, decline in readership
2. See price above: $11.65
3. ?? My initial thoughts was say $20
4. Saw some good articles on e-readers and a few tough ones on book sales
5. I didn't buy BKS but after the huge drop I like the thought of purchasing some shares
6. Followed the story and saw these events as positive:

- Barry Rosenstein runs  JANA Partners which disclosed roughly a 7 million share position in BKS.  BKS was up big (around 18%) and rumors have already started to rise about will he force them to split the company up. 
- Microsoft invests in the Nook e-reader
- An investor who started off negative has has a change of heart. See Whitney Tilson 

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