Important Updates for Investors
Carla Pasternak's Premiere Issue of High-Yield International Just
Released
Income expert Carla Pasternak's debut issue of High-Yield
International covers a Taiwanese manufacturer yielding 9.5%... a
rare Mexican monopoly yielding 13.4%... and other top-performing
investments yielding up to 19.0%.
Government's Biofuel Timetable Could Spell +15,900% Growth
+15,900% growth might seem far-fetched... but it's not. In fact, it
is mandated by law. And I've identified the ONLY stock positioned to
capture this growth.
The
Silver Lining to a Falling Dollar
Despite the U.S. national debt, there is a silver lining for income
investors. This massive spending, combined with movement out of U.S.
Treasuries, is going to take its toll on the dollar, and
international income investors could reap the rewards in the form of
higher dividends. |
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Twenty-Two Firms Following in
Starbucks' Footsteps |
Published:
June 5, 2007
The dream of every investor is to identify companies with strong,
defensible competitive advantages. Whether that advantage comes from a
strong brand name or a superior product, companies with a competitive edge
can charge premium prices for their products and services without hurting
demand.
Consider coffee retailer Starbucks (Nasdaq: SBUX). Twenty years ago, coffee for most
Americans was a simple beverage served at breakfast and costing perhaps a
dollar a cup. But Starbucks saw an opportunity, and the company started
serving premium coffees and specialty drinks such as iced coffee and
cappuccino. In addition, the firm created a unique coffee experience --
attractively designed coffee shops offering a pleasant ambiance.
Over the years, Starbucks also developed a strong brand name and reputation
that was associated with quality. The result: the company was able to charge
premium prices for its beverages. Today, morning rush-hour customers are
literally lining up to pay $8 or $10 for a specialty coffee drink. Simply
put, Starbucks has strong pricing power.
In fact, pricing power is one of the most recognizable hallmarks of firms
that boast a true competitive advantage. So, how exactly do we measure
pricing power?
Perhaps one of the most direct means of measuring pricing power is to
examine a firm's profit margins. Margins measure how much profit a firm
generates out of each dollar in sales. The higher a company's profit
margins, the more profitable the firm. There are several ways to calculate
profit margins, but one of the most useful is operating margins -- or
operating income divided by total revenues.
Many firms occasionally generate extraordinary income from time to time
through activities outside their core business, such as the sale of an
asset. These one-off sources of income are non-recurring and can make a
company look more profitable on paper than it really is. By using operating
income instead of net income, we effectively strip out the impact of these
one-time events and evaluate a firm's true ability to generate profits.
There is no magic number to look for when examining operating margins, as
they tend to differ from industry to industry. But, as a rule of thumb, a
margin above 20% is better than about nine out of ten companies in the S&P
500 at this time. Also, it's important to look for consistency over time.
While every company can have a great year and show high profits
occasionally, only great firms can maintain that high profitability year
after year.
Of course, Wall Street has long been enamored with growth -- it's not enough
for a company to simply have a high operating margin. Firms with true
competitive advantages and real pricing power can maintain lofty profit
margins and still grow their sales.
With these points in mind, my staff and I recently searched for companies
with high profit margins and strong sales growth. In the process, we looked
for companies that met the following criteria:
Three-year annualized revenue growth of +30% or higher
Three-year annualized earnings growth of +30% or higher
Operating Margin in each of the past 5 years of 20% or higher
Market
capitalization of greater than $150 million
After running these criteria through StreetAuthority's advanced screening
software, we came up with the following list of companies...Important Note: Throughout the remainder of this article,
Editor Paul Tracy and our research staff provide
the names of 22 companies that meet the requirements above. However, in order to view the remainder of this article, you'll need to subscribe to our premium newsletter --
Market Advisor. After you subscribe you'll receive immediate access to this full article, as well as our monthly
Market Advisor newsletter and a host of additional premium content. Please visit one of the following links to continue...
Good investing!
-- Paul Tracy
Editor
StreetAuthority
Market Advisor
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receive in-depth guidance on today's leading investing
opportunities each month, plus access to five model
portfolios, please subscribe to Paul Tracy's premium investment
newsletter -- the StreetAuthority
Market Advisor. |
Paul Tracy
founded StreetAuthority and became Chief Investment Strategist in 2001. Prior to
that he spent several years as Managing Editor at a multi-million dollar
financial publishing firm with over 150,000 subscribers. In addition to
his role as managing editor and lead financial writer, he was also
responsible for equity research and managing a team of seasoned
professional financial writers, researchers and market commentators.
Paul's previous experience
includes a position at Robert W. Baird & Co.'s full-service
brokerage operations as well as economic research work on a Money and
Banking project funded by the National Bureau of Economic Research. He
has also spent time doing outside consulting and research for the
University of Virginia, has appeared as a guest expert on several
prominent financial radio shows, and has been a featured speaker at
various investment conferences across the U.S.
Paul graduated with a B.S.
in Finance and Management from the McIntire School of Commerce at the
University of Virginia.
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Investing Doesn't Get Any Easier Than This |
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Go here to learn about Amy's simple investing strategy.
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