With trading days left in 2010 dwindling many investors are
looking through their portfolio and trying to decide what should
stay, what should go, and where to increase exposure.
True, the major stock indexes are up for the year: The Dow Jones
industrial average has rebounded 10 percent in 2010, and the
Standard & Poor's 500 has regained about 11 percent.
Small-cap stocks also are up - but more than double the
Dow and S&P 500. The S&P's small-cap 600 and the Russell
2000 are both up around 25 percent year-to-date.
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Digging into the S&P 600 it's apparent that the energy
sector is the top-performing sector, up around 40 percent
year-to-date. Surprisingly, close behind is the consumer
discretionary sector which is up 36 percent.
***One top performing S&P 600 consumer stock is
Brown Shoe Co. (
an old name that most people might better recognize for its Famous
Footwear chain and its Naturalizer brand.
This year, Brown Shoe's stock has risen about 45 percent, even
after selling off since peaking in April at $19.96.
Traders have been a little skittish about Brown Shoe and other
retail-related stocks at times this year given a relatively weak
consumer, but lately there's a bullish sentiment surrounding the
After all, everyone needs shoes of some kind, and Famous
Footwear, a chain that Brown Shoe operates, markets itself as
offering value for the entire family. Brown Shoe estimates that 10
percent of American families shop Famous Footwear during the
***Brown Shoe's stock has been listed on the New York Stock
Exchange since 1913. The Naturalizer brand was created in 1927, and
Naturalizer stores rose in popularity after World War II, along
with the Baby Boomer generation. Much of the company's growth has
been through acquisitions, such as buying Famous Footwear in 1981
and expanding from a small 36-store chain to more than 1,100.
For the 12 months ended in October, Famous Footwear was the
nation's No. 3 stand-alone shoe retailer, behind the Payless chain
Collective Brands (
and Designer Shoe Warehouse of
Retail Ventures Inc. (
and just ahead of
Foot Locker (
***Beyond its retail presence, Brown Shoe also is a major
wholesaler, with some 2,000 accounts that put its products in most
department stores and major independents. That business, which
accounts for 30 percent of sales, also lowers the pains of a
competitive retail environment still struggling to find its footing
in a recession-stressed economy.
Brown Shoe has been around since 1878, but it didn't really take
off until 1904, when it became linked to the Buster Brown comic
character. At the 1904 World's Fair in St. Louis, a young company
executive met the cartoonist who created the comic strip character,
which became the company's marketing symbol. Brown Shoe began
marketing itself through road shows of actors dressed as Buster
Brown, with his little dog Tiger, too, and sold the Buster Brown
shoes for kids.
***Lately, Brown Shoe has been developing the long-term license
it holds for the Dr. Scholl's brand, and maximizing the website
. It also has been creating celebrity shoe lines, with such stars
as Carlos Santana, Reba McEntire and Fergie, along with some
higher-margin fashion brands. In 2007, it launched stores in
For the October quarter, Brown Shoe reported 14 percent
increases in both earnings and revenue, while same-store sales at
Famous Footwear grew 11 percent.
Restructurings have also improved the balance sheet, and are one
reason why the company should post substantially better earnings
when its fiscal year ends in January. Analysts surveyed by Thomson
Reuters are calling for earnings per diluted share of $0.93, nearly
360 percent 2009 EPS of $0.26. Revenue growth is expected to be
around 12 percent. Earnings in 2011 are expected to rise another 40
percent, to around $1.31 per share.
Brown Shoe is a nice value play. With a forward P/E of just 10.9
and a nearly 2 percent dividend that it has paid for 351
consecutive quarters, you should definitely consider picking up
shares. While the holiday shopping season will determine the
direction of the stock price in the short term, a solid quarter
could return the stock to the $20 range. That's an upside potential
of 39 percent.
For more dividend paying small cap stocks, including two that
are currently yielding more than 8 percent,