Q Can shares of Saks Inc. continue to increase?
R.F., via the Internet
A This luxury retailer, which has been seeing sales rise, is positioned to benefit as shoppers emerge from the recession.
Its stock is gaining luster thanks to its improved ability to control its costs.
After a disappointing 2008 sales season, Saks focused on less discounting, reducing inventories and adding some less-expensive merchandise. It has improved its operating margins, though they still lag rivals such as Neiman Marcus and Nordstrom.
Shares of Saks (SKS) recently were up 50 percent this year after last year’s 50 percent gain.
The upscale retailer is taking further steps to improve its prospects, including an increase in exclusive brands to 20 percent from 10 and reducing the time it takes to fulfill online orders to 17 hours.
Saks receives a consensus recommendation between “buy” and “hold” from Thomson Reuters. That consists of three “strong buys,” two “buys,” three “holds,” two “underperforms” and one “sell.”
Under the direction of Stephen Sandove, losses have been narrowing, though debt remains substantial. Saks lost $57.9 million in the fiscal year ended Jan. 30, compared to a loss of $158.8 million a year earlier.
The forecast of a five-year annualized earnings gain of 10 percent compares to 12 percent projected for the department store industry, according to Thomson Reuters.
Q What about Oppenheimer Global Opportunities Fund as an overseas investment?
B.F., via the Internet
A This world fund keeps nearly half of its holdings in U.S. stocks. So if your goal is overseas investment, you might try a fund with a portfolio of purely foreign stocks. This fund can also be quite volatile, though its track record is excellent and it has an experienced manager who can spot trends.
The $3 billion Oppenheimer Global Opportunities Fund (OPGIX) recently was up 50 percent in the last 12 months and had a three-year annualized gain of 1 percent. Both ranked in the top 10 percent of world stock funds.
“We’ve recommended Oppenheimer Global Opportunities for several years, with the warning that it is one of the more volatile choices and investors must be prepared for it to take on some very different looks (in portfolio) at times,” said Karin Anderson, analyst with Morningstar Inc.
Portfolio manager Frank Jennings, in charge since 1995, makes his long-term portfolio choices based partly on themes: “mass affluence, new technologies, restructuring and aging.” He also has a heavy weighting in mid- and small-cap stocks.
“What has set this fund apart has been his willingness to load up on his top stocks, though more recently he’s been trying to limit them to around 10 percent per stock,” Anderson said.
Software and health care each represent about one-fifth of the portfolio, with other concentrations in industrial materials, consumer services and consumer goods.
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This 5.75 percent “load” (sales charge) fund requires a $1,000 minimum initial investment and has an annual expense ratio of 1.33 percent.
Q Why invest in TIPS?
F.B., via the Internet
A TIPS blunt the potential effects of inflation.
Treasury Inflation Protected Securities, or TIPS, are indexed to inflation and carry low risk because they are backed by the U.S. government.
The principal increases with inflation and decreases with deflation, as measured by the Consumer Price Index. When TIPS mature, you are paid the adjusted principal or original principal, whichever is greater. TIPS pay interest twice a year at a fixed rate.
TIPS are sold through the TreasuryDirect system in $100 increments with a minimum investment of $100. TIPS can also be purchased through mutual funds that invest in them.
Gains are exempt from state and local taxes but not federal taxes.
Andrew Leckey answers questions only through the column. E-mail him at [email protected].