One of the cardinal rules of investing is that you should never
fall in love with a stock. But in honor of Valentine's Day, we've
found five romantically inspired companies that deserve some
affection. These stocks aren't just for flings. Look at them as
candidates for long-term relationships.
You may not be familiar with L Brands (symbol
, $65), but you've probably heard of two of its sensual
subsidiaries: Victoria's Secret, the lingerie chain, and Bath &
Body Works, which sells soaps, lotions and other spa-like products.
Both retailers garner more than one-fourth of all sales in their
markets, and both have room to grow. Analysts see L Brands, which
does about $11 billion in sales annually, boosting earnings by 12%
in the fiscal year that ends January 2015. At 18 times estimated
earnings for that year, the shares are a bit more expensive than
the overall market, but the price is fair given L Brands' growth
potential. (All prices are as of November 29.)
For something with a little more bling, consider Signet Jewelers
, $77). The Akron company owns the Jared and Kay Jewelers chains.
And in 2012, Signet bought Ultra Stores, an outlet-mall franchise.
Signet now has more than 1,400 stores in the U.S. and should be
able to generate annual sales growth of at least 6% for the next
few years, says Gregory Herr, co-manager of FPA Perennial Fund. The
firm's aggressive advertising--you've no doubt heard that "Every
kiss begins with Kay"--will also help. The stock trades at 14 times
projected earnings for the year that ends January 2015.
For still more sparkle, indulge in Tiffany (
, $89). U.S. sales have lagged recently, so the 176-year-old
company has been expanding its lower-priced sterling-silver
collection to appeal to a broader customer base. "That end of the
business is more profitable than $15,000 rings," says Brian
Yarbrough, an analyst at Edward Jones. In addition, the New York
City company continues to expand overseas. Sales in Asia, excluding
Japan, grew by a whopping 22% during the quarter that ended October
31. The stock jumped 9% on the day the earnings report was
released, and now sells for 21 times projected earnings for the
year that ends January 2015. That's not a bargain price, but it's
reasonable given the strength of Tiffany's iconic blue-box
The business of turning the byproducts of pork, beef and chicken
into biodiesel fuel and animal feed may not strike you as romantic.
But although its business may be gross, Darling International (
, $21) is a company with a sweet name. Prices for corn have come
down lately, and a proposed rule by the Environmental Protection
Agency that would freeze mandates for biofuel supplies at 2013
levels could limit demand. All of that could cause headwinds for
Darling in 2014. But the Irving, Tex., firm has started to expand
internationally through recent acquisitions in Canada and the
Netherlands--moves analysts think will help generate 35% earnings
growth in 2014. Any turnaround in corn and fuel prices would
further boost earnings.
Finally, it's hard not to fall for Southwest Airlines (
, $19), the company with the market's most heart-warming stock
symbol. Like other airlines, Southwest shares have been on a
tear--they've nearly doubled over the past year. A rebound in
business travel has helped. But perhaps the best thing the industry
has going for it is the recent spate of airline mergers.
"Consolidation is healthy for all the airlines because they won't
have to continually lower fares to compete," says Andrew Davis,
associate director of stock research at T. Rowe Price. Moreover,
Southwest's CEO recently suggested that the airline may start
charging for checked baggage. Imposition of those fees wouldn't be
good news for budget-minded fliers, but it would likely endear the
company to investors.