3 Stocks Almost Priced Right: Life Time Fitness, Inc. (LTM), Kohl’s Corporation (KSS), Family Dollar Stores, Inc. (FDO)

Page 1 of 2

I recently cashed out of a few of my stocks that had made a nice run, and now I am deciding what to do with money that is currently sitting on the sidelines.  The problem is that with the Dow hovering above 14,000 and many stocks trading at valuations that assume perpetual growth, there aren’t that many stocks that look very attractive.  But I have found 3 stocks that I feel were unfairly pummeled by the market and offer a healthy return over the next few years.

Life Time Fitness, Inc. (NYSE:LTM)Life Time Fitness, Inc. (NYSE:LTM)

The first stock that showed up on my radar is Life Time Fitness.  On Feb. 1 this stock got hammered – it fell by more than 20% in one day on an earnings miss.  The catalyst that sent the stock price plummeting was that the company issued weak preliminary results for 2012.  Instead of meeting analysts’ expectations of $2.69 per share on revenue of $1.13 billion, Life Time Fitness said that it expects to deliver between $2.63 and $2.66 per share for 2012 on revenue of approximately $1.13 billion.  That was down from its prior forecast of $2.73 to $2.76 per share on revenue of $1.13 to $1.14 billion.  Earnings did not meet prior forecasts because of expenses related to Sandy and technological investments.

Life Time Fitness is a company that I have followed for several years.  In fact, just a few months ago I renewed my membership at the local Life Time Fitness.  If you have never visited a Life Time Fitness, then you should consider doing so.  The place is phenomenal – that is all that I am going to say.  All in all, this company is very well managed, has a very strong brand, is making wise investments in technology, focuses on profitable growth and the long term, and is poised to deliver solid returns for the patient investor.  An earnings miss of a few pennies does not justify this devaluation and presents a very attractive entry point.  At a forward P/E multiple of around 13, I am a buyer!

Kohl’s Corporation (NYSE:KSS)

A second stock that hit my radar was Kohl’s.  Admittedly, I am not a big fan of most department store retail Stocks.  And like Life Time Fitness, Kohl’s was also impacted by the hurricane.  But given Kohl’s underlying fundamentals and valuation I feel that there is a solid 10% – 15% upside with limited risk.  After all, compared to its competitors (J.C. Penny, Macy’s, Sears, etc.), Kohl’s is trading at around a 15% – 20% discount to the market multiple.  Furthermore, Kohl’s has a conservative capital structure, strong gross margins, and effective marketing.  As long as Kohl’s can maintain its margins, minimize inventory, and strike the right balance between exclusive brands and national brands, its stock is well-positioned to deliver a solid 10% – 15% annual return or more with minimal risk.  If and when Kohl’s is selling at a forward P/E multiple of less than 10, I may consider initiating a modest position if I cannot find better value elsewhere.

Family Dollar Stores, Inc. (NYSE:FDO)

The third and final stock is Family Dollar Stores.  Not so long ago Family Dollar Stores and Dollar General Corp. (NYSE:DG) were fairly hot stocks.  Because analysts’ liked their growth potential and thought that consumers would trade down in a recession, these stocks soared and were trading at price to earnings multiples that reflected a modest amount of growth.  Then Family Dollar and Dollar General had bad quarters and reduced guidance, which sent their shares plummeting.  Family Dollar shares, for example, are currently trading well off their 52-week high of close to $75 a share.  To combat this downward trend and restore investor confidence in Family Dollar’s growth potential, Family Dollar CEO Howard Levine recently increased the company’s dividend by more than 23% – which represents the 37th consecutive dividend increase for Family Dollar.  Over the past several years Family Dollar has grown earnings at around 12%, which is almost double the average rate of the S&P.  At a P/E multiple of around 13, I may consider purchasing shares.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!