Even buy-and-hold investors can't afford to let their portfolios collect cobwebs. Valuations and fundamentals change perpetually, and shareholders need to know what they're holding -- and if there's more potential for growth elsewhere. Here we take a look at some stocks worth swapping.
Enjoy it while it lasts, Barnes & Noble (BKS) stockholders.
Shares of the book-selling superstore chain rose nearly 15% last Tuesday, after Barnes & Noble posted healthy growth for its Nook e-reader.
Yes, Nook-related sales, which now account for 20% of the sales mix, rose by a whopping 140%. But the quarter itself was a mess. The bookseller posted a steep loss, even when taking into account earnings before interest, taxes, depreciation, and amortization (EBITDA). Despite the Nook lift, sales rose by merely 2%. Back out the Nook hardware and digital downloads from the equation, and sales actually fell by 11%.
Ouch! Sales are slipping at both the cavernous superstores and the college bookstores it manages. This isn't going to get any better. Barnes & Noble's hope is that the Nook grows into a profitable juggernaut, yet isn't that related -- to some extent -- to the visibility of its fading physical stores?
The retailer's online sales are growing nicely, but the margins there are even lousier, and that's where Barnes & Noble checked in with its biggest EBITDA loss on the quarter.
If only there were a company with a stronger e-book business that can run an online store profitably.
Oh, wait -- there is: Amazon.com (AMZN).
What's Going to Nix the Nook
Barnes & Noble CEO William Lynch pegs the Nook's market share at 26% to 27%, a distant second to Amazon's Kindle.
The Nook Color is a standout for Barnes & Noble, but everyone fully expects Amazon to introduce an entry-level tablet later this year for those who want more color out of their Kindles. When it does come out, Nook Color owners will be wondering why they're not streaming video or playing apps on their gadget.
How is Amazon doing these days? Net sales catapulted to 51% in its latest quarter. Unlike Barnes & Noble's experience, selling Kindles at a third of what they cost just four years ago isn't getting in the way of profitability during a seasonally sleepy quarter. Margins at Amazon would be better if it wasn't for the Kindle, but it's not a financial drag.
Barnes & Noble's Bailout: Malone Alone
Liberty Media's John Malone wanted to buy Barnes & Noble a few months ago, but realized a few weeks ago that it's better to buy just a 20% stake in the meandering bookseller.
No one else stepped up to counter Malone's bid at the time, and rightfully so. Even if Barnes & Noble argues that the "going out of business" sale at rival Borders is partly to blame for its soft retail sales, it's not as if the chain will greatly benefit when Borders does complete its liquidation.
Bookstores aren't the intellectual hotbeds of locals that they used to be, and folks will continue to read on their Kindles and iPad tablets in greater numbers in the future. Do you really want to be a Barnes & Noble investor the day that Amazon announces its Nook Color killer in a few weeks?
I'll stick with Amazon.com.
Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. Motley Fool newsletter services have recommended buying shares of Amazon.com.