Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Target Corporation (TGT), Wal-Mart Stores, Inc. (WMT): Aiming For Green

Page 1 of 2

Peter Lynch suggested that investors buy what they know. If I had followed his advice, I would have bought Target Corporation (NYSE:TGT) a long time ago. Fortunately, I did buy the stock this year, but with the many thousands of dollars I’ve spent in the store, I feel like a fool (and not the Motley Fool kind). Investors take note, you can still be late to the party and make money. I didn’t buy Target because it’s a huge growth story, but because the company offers a compelling combination of growth and income.

Target Corporation (NYSE:TGT)

It’s Boring
For several years, I deluded myself into avoiding Target Corporation (NYSE:TGT)’s stock because I thought the stock was too boring. I figured if Wal-Mart Stores, Inc. (NYSE:WMT) was bigger, and, Inc. (NASDAQ:AMZN) offered cheaper prices, that there wouldn’t be much left for Target in the middle. In addition, I saw other stores like Kohl’s Corporation (NYSE:KSS) as a competitive threat to Target’s clothing and home goods.

The truth is, all of these companies are competitive threats. However, Target Corporation (NYSE:TGT) has managed to make a very nice living in the middle of these companies. Target doesn’t try to compete exclusively on price, although they will match prices. The company doesn’t try to have more stores than Wal-Mart Stores, Inc. (NYSE:WMT), and they aren’t going to sell as wide of a variation of goods as, Inc. (NASDAQ:AMZN) does. That being said, if you walk in most Target stores, they are busy.

With $10,000 in 2003, you could have acquired about 273 shares (price of $36.63 in May 2003) of Target Corporation (NYSE:TGT). Ten years later, these 273 shares would be worth about $18,976, not to mention you would have collected over $1,900 in dividends during that same time frame. Including dividends, that works out to an annualized return of about 7.5%, and if you reinvested your dividends, the return would have been even higher. Considering the market had one of the worst corrections in 70 years during this time frame, that type of result isn’t boring at all.

What Is Target Doing Right?
First, the company is outperforming its traditional competition when it comes to same-store sales. In the last three months, Kohl’s Corporation (NYSE:KSS) reported same-store sales fell 1.9%, and Wal-Mart Stores, Inc. (NYSE:WMT)’s U.S. division saw a decline of 1.4%. By comparison, Target Corporation (NYSE:TGT)’s decrease of 0.6% doesn’t look that bad. Bad weather, plus a higher social security tax rate hurt sales, and Target held up better than most.

While it’s true that, Inc. (NASDAQ:AMZN) represents a clear threat to Target, over the holidays last year, I found several things Target is doing to battle this online Goliath. Target decided that helping Amazon by selling the Kindle Fire lineup wasn’t a smart move and decided to jettison this product. Target’s strong suit isn’t computers and electronics anyway, so this wasn’t a huge deal. Target Corporation (NYSE:TGT) also is keeping its margins healthy by focusing on what the company does best, namely clothing and home goods. Many customers like to try on clothes before they buy, and home goods are a matter of quality, which you can’t always discern online. Combine these moves with the willingness to match prices, and Amazon is less of a threat than it used to be.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

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 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!