Question:
I’m being offered some Primerica insurance products, and in my looking at the company, I started looking at the stock. What do you think about the company?
Answer:
We recommend passing on Primerica Inc. (NYSE: PRI) stock. The company distributes financial products, such as, life insurance and annuities, to mainly middle income households. While we do not prefer to purchase annuities, they likely have some good products. The stock, however, is not appealing. It may seem cheap, trading at 12.1 times earnings, but when you compare it to its competition, Metlife Inc. (NYSE: MET), Metlife is much better off financially. Metlife manages its portfolio better; it has a long history with a dividend, and Metlife trades at seven times earnings. We believe there are better companies in the insurance industry. When considering any insurance company, we believe you should look at their portfolio because there could be exposures to European debt that you will want to avoid.
Question:
I’m looking at both Philips Electronics and Harman International, and wanted to know if you have a preference or if both are a good option.
Answer:
Koninklijke Philips Electronics NV ADR (NYSE: PHG) is the Netherlands-based parent company of Philips Group. The company is diverse in their products, providing electronics in Healthcare, Industrials and Lighting. The company is also geographically diverse with 124 production sites in 26 countries.
Harman International Industries (NYSE: HAR) is more a pure-play company in audio electronics. They have brands that include JBL, Infinity, Harman/Kardon, and dbx. Harman may be more focused in their product line, but their balance sheet looks better, with no debt and higher margins. The company also has the potential for increased sales through their contracts with auto makers. They have a huge backlog, so right now Harman looks more appealing. The stock pays a dividend of 1.30% versus Philips’ dividend of 4%, but Philips’ dividend has been very volatile.
Philips has been beaten up in the market a bit, so a bargain shopper might see the stock as a good buy. We suggest that you do more research before you purchase. The stock’s beta is above 1.20, as earnings have been volatile. Harman’s beta is high as well—at 1.2—so volatility will be a factor.
Question:
Looking at specialty retailers, who do you like, Michael Kors or Dick’s Sporting Goods?
Answer:
Michael Kors Holdings Ltd. (NYSE: KORS) has only been public since 2011. We usually would not buy something that has been on the market for such a short time. The company looks good, but we would want to do more research. If you believe in the product, the stock is OK to buy, but you should watch closely how the company is run. Furthermore, the stock trades at the high end of its historical valuation in terms of P/E. The designer, marketer and distributor of high-end apparel and accessories has about 170 retail stores in the United States, and several in Europe and Japan. Japan could prove to be a good market for Michael Kors, as American luxury brands are quite popular there.
Dick’s Sporting Goods Inc. (NYSE: DKS) is a typical sporting goods store. We think it is pretty well run, but do not like the margins. We believe Amazon and other online retailers will keep poaching the retail store’s sales and customer base. Overall, we haven’t seen a sport store that had staying power. It looks like high quality, but its price to earnings ratio is a little above the market. If you own Dick’s Sporting Goods, it is OK to hold, but you will need to watch its long-term prospects. If you do not own it, now is not a good entry point. With its dividend around 1%, we do not recommend this as a buy.
At Henssler Financial we believe you should Live Ready. If you have questions on company stocks you are considering investing in, the experts at Henssler Financial will be glad to help. You may call us at 770-429-9166 or email at experts@henssler.com.
Disclosures
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
