It's Valentine's Day, and you're frantically hitting the stores, hoping you'll spot that perfect gift for your sweetheart. Shake that glazed, deer-in-the-headlights look from your eyes for a minute and look around you. Notice anything?
You should notice that the store is full of other wild-eyed shoppers, tossing their credit cards around with abandon in hopes that that if money can't actually buy love, it can at least give love a nudge in the right direction. And the shopper who is also an astute investor will come to the conclusion that there are some companies doing very well out of all this - and maybe their stocks are, too.
On that romantic note, here's a glimpse at some of the big names in the Valentine business that you might want to consider for your investment portfolio - be it a brief fling or a long-term relationship.
Limited Brands Inc. (LTD-NYSE)
Intimate underthings are always popular around Valentine's - and always problematic. Men love to look at them, but they're not the ones who have to squeeze themselves into pinching, riding, impossibly flimsy garments on a cold February night. Then there are sizes - guess too small and you're a dreamer, too big and you're an insensitive lout. How about something nice yet sensible, like some fleece pyjamas? How about sleeping on the couch?
Yet if you're selling the stuff, all the romance in the air at this time of year is undeniably good for business. And none are more invested in lingerie than Limited Brands Inc.
Limited Brands is an umbrella company for several retail chains, but the heart of its business is lingerie. The Victoria's Secret and La Senza operations account for almost two-thirds of the company's $9-billion (U.S.) in annual sales.
Analysts are lukewarm on Limited's stock, but a big part of that reflects what the shares have done already: Up 60 per cent in the past 12 months. At a forward 12-month price-to-earnings multiple of 16, the stock is still trading at a relatively reasonable valuation, although it is a bit on the high end among S&P 500 apparel retailers. The company just came through an uplifting holiday season - same-store sales jumped 10 per cent - and shareholders where titillated by a $3 (U.S.) special dividend late last year, the second-straight year the company rewarded investors with a fistful of cash.
Annual dividend: 80 cents (U.S.)
Dividend yield: 2.5%
Number of shares needed for the annual dividends to pay for purchase of one Victoria's Secret Very Sexy Bra: 57
Hershey Co. (HSY-NYSE)
For your exposure to this tasty Valentine's treat, you might be best advised to just cut out the middle man and dip your portfolio directly into cocoa. The price of the commodity has surged 20 per cent since early January, amid threats that a political crisis could halt cocoa shipments out of Ivory Coast, by far the world's biggest cocoa producer.
But since the theme here is Valentine's-related equities, we suggest Hershey Co. , the U.S.-based chocolate giant that dominates the North American market. Yes, its products might be considered disappointingly mainstream as Valentine's gifts, but its stock looks sweeter than many of the higher-end chocolatiers in the market.
Its forward 12-month price-to-earnings valuation, at 18 times, is at the low end of its historical range, despite a 33-per-cent rise in the stock over the past year. And while fancier confectioners such as Lindt and Spruengli AG, Barry Callebault AG and Rocky Mountain Chocolate Factory Inc. have seen the trajectory of both their revenues and prices flatten, Hershey's bullish growth outlook for 2011 this month inspired both JPMorgan and Credit Suisse to upgrade the stock to a "buy." Hershey's recent dividend increase will also leave a pleasant taste in your mouth.
Still, you might want to keep an eye on events in Ivory Coast - higher cocoa prices could certainly take a bite out of Hershey's profits this year.
Annual dividend: $1.38 (U.S.)
Dividend yield: 2.8%
Number of shares needed for the annual dividends to pay for one Hershey's Kisses gift bag: 4
Harry Winston Diamond Corp. (HW-TSX)
For those who like to go with something more dazzling (and expensive) than a bit of sweetness and lace, it's hard to beat a diamond. (Except, maybe, a diamond in a Parisian luxury suite overlooking the Eiffel Tower.) And when it comes to publicly traded purveyors of fine diamonds, one need look no further than Canada's own Harry Winston Diamond Corp. , whose business covers the entire range from diamond mining (it owns 40 per cent of the Diavik mine in the Northwest Territories) to retailing (it runs its own chain of high-end jewellery stores).
Harry Winston's products may not be cheap, but its stock is cheaper than it has been in more than a decade - at around $12 (Canadian) a share, it's less than one-quarter of its mid-2000s highs. Contrary to traditional belief that luxury products are exempt from the impact of recessions, Harry Winston was just one of many luxury-product stocks that were hit hard by the economic slump and have been slow to recover. But world diamond prices rebounded in 2010 and analysts expect the price improvement to continue this year, amid a returning global appetite for jewellery and tight supplies of rough diamonds.
UBS analyst Brian MacArthur recently upgraded the stock to a "buy," saying the stock's 27-per-cent slide from mid-December to late January presented an attractive entry point for investors. The stock has since recovered about 10 per cent. There are still concerns about the health of its businesses in the near term, but analysts believe that the current price is hard to beat.
Annual dividend: none
Dividend yield: n/a
Number of shares needed for the annual dividends to pay for one Harry Winston Attraction diamond ring: If you have to ask …
HOW ABOUT A NICE CARD?
American Greetings Corp. (AM-NYSE)
No matter which way you go with your Valentine's gift, a card is an essential part of the package. In fact (I can hear the amateur historians grumbling), Valentine's Day as we now know it is so much a creation of the greeting-card industry that we sometimes cynically call it a "Hallmark holiday."
Hallmark - the world's biggest greeting-card company - is privately owned, so we can't cash in on our annual mass societal guilt trip by buying their stock. But we can own a piece of American Greetings, the largest publicly traded card company, which owns (among other things) the Carlton Cards retail chain in Canada.
Analysts are bullish on American Greetings' stock for one simple reason: It's cheap. Despite a 25-per-cent price rise over the past 12 months, the stock is trading at a tiny nine times its forecast 2011 earnings per share.
One nagging concern for American Greetings is something that it shares with pretty much all printed forms of communication: the Internet. As you may have noticed over the recent holiday season, e-mails, social media and other forms of electronic greetings are making Christmas cards all but obsolete for a growing number of people. But American Greetings is already the biggest provider of e-cards on the Web, positioning itself reasonably well for the trend toward electronic greetings.
And let's face it, you can't tape the Internet to the outside of that fabulous lingerie/diamond/box of chocolates you lovingly wrapped for your Valentine, can you?
Annual dividend: 56¢ (U.S.)
Dividend yield: 2.6%
Number of shares needed for the annual dividends to pay for one Carlton Valentine's card: 11
|HSY-N The Hershey Company||96.26||
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|LB-N L Brands, Inc.||60.92||
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