Two people asked us to try out the Buffet Value Spread Sheet today. The wanted to check out KEY KeyCorp operates as a holding company for KeyBank National Association that provides various banking services in the United States. The company's Community Bank segment offers regional banking services, including deposit and investment products; personal finance services and loans comprising residential mortgages, home equity, and installment loans; deposits, investment and credit products, and business advisory services to small businesses; and financial, estate and retirement planning, and asset management services to high-net-worth clients.
The other stock is TGT, Target. Regular readers know we have been in and out of TGT many times usually making money.
Now remember this spreadsheet we are using was derived (A clever word for stolen. Well actually we are a paid member in the AAII so it is not stealing.) from an AAII spreadsheet that accompanied an great article about how Warren Buffet analyses value. Also keep in mind that there are two usually successful strategies for managing a portfolio growth and value. Our favorite growth discipline comes from William O'Neils CANSLIM method and our value methods do follow Graham/Dodd/Buffet disciplines.
Let's take a look at TGT Target. We believe that you can guage the performance of the retail sector by watching the lfow of money between WMT and TGT. When consumer confidence is up you will see a larger segment of the public shift purchases from WMT to TGT and vice versa. Right now the shift is subtle but is probably in flux again from TGT back to WMT.
The person asking is a self proclaimed long termer so that shift is not as crucial to some one with a shorter investment horizon. We will define longer term as more than 24 months.
From looking at all the research we have access to we would peg TGT with a fair value of 58 to 60 a share. It current value while still in flux and possibly threatened by the current economic stresses is attractive at $46.41. On the positive side its fashion and home furnishings departments are doing very well according to their last 10Q. Their array of brand names does create a sizable competitive moat. More recently their credit card division is improving and write offs are not as big a problem as 14 months ago. (One of the reasons we bailed the last time.) Their 5% back program appears to be buying customer loyalty. On the down side, NEVER turn your back on WMT. Some of their recent success is generated from their higher end discretionary products, which is threatened in this latest "soft patch".
In a nutshell, TGT is a good buy at this price. Our suggestion would be to ease into it over a period of five 20% installments until your position is established. Put a stop in at $40.00. We know that implies a 20% loss, but this is a long haul investment and it could come down another 10%.
The Buffet Value SS has future annual return pegged between 9-15%. Not to shabby considering the 10 year yield is below 3 at the moment. The Salve Lucrum return goal is 7% this year. This kind of value puts TGT back on our watch list.
We ran the number for KEY and it is not pretty. The 10 annual return implies a -27.1 return based on historical EPS growth and an even worse return based upon sustainable growth. Now a lot of the recent carnage is tied to the repayment of TARP monies. It looks as though their assets are not to toxic. The company is trading just below book value. We do not like the banking sector and even if we made a play in the sector it would not be this bank. Sorry Aunt Kay. We would not even throw this dog a bone.
Salve Lucrum