DBurton 97 asked about Ross Stores (ROST)

DBurton thanks for the submission. Sagezeke gave you a solid answer on NYL so please take a look at his comments.

As for ROST this discount retailer is a solid play. They are pulling in market shares from fully priced retailers and in particular in the states of Florida, California and Texas. The sales continue to grow, keep expenses under control and have a strong management team. What else could you ask for in an investment in a business? More growth and that's about it. Today they reported an 8% increase in Jan. sales. Who could ask for anything more.

http://www.marketwatch.com/story/ross-stores-same-store-sales-up-8-in-january-2010-02-04?tool=1&dist=bigcharts&symb=ROST&sid=4160

Since we are looking at such strong numbers that also pays a nice 1.39% dividend let's look a closer look at the price action.

http://stockcharts.com/h-sc/ui?s=rost

As we can see the stock is currently down trending however with a BETA with .72 there is not a lot of risk on the volatility of the stock.

BETA measures a stocks relationship of volatility in relation to the market. Most use the S&P 500 as the benchmark. If it's above 1 then it's more volatile and risky than the S&P 500. Below 1 then it's less. 

So ROST is less risky then the S&P 500 but how does it do against it and Walmart (WMT) in terms of price movement.

http://finance.yahoo.com/echarts?s=ROST#chart2:symbol=rost;range=6m;compare=wmt+^gspc;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

As you can see from the 6 month chart it underperformed both. Now we know that the S&P has more risk because of the BETA so risk and return is inherit with one another. More risk, better chance of return. However if we look at Walmart (WMT) who is the largest discount retailer this shows a lot. 

WMT pays a 2% dividend and has a BETA of .2. You are taking over 3 times the amount of risk versus the S&P on ROST for less performance and less in payment of a dividend.

This shows why Fundamentals and understanding how to not only value companies but compare them to their peers and the market is so important. Below are some periodicals on Fundamental investing. I encourage everyone to check them out.




















Does this mean that ROST is not a good investment? No because as part of a diversified portfolio it fits right in.


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