What are the risks of buying Dillard's (and similar) stocks right now?
Correct me if I’m wrong…but it seems like now is a good time to buy stock in companies that are likely to stick around through the recession–especially if they were doing well up until the recession, and are likely to do well again once they’re back on track.
Just for the sake of having an example (I would of course diversify)…if I were to buy Dillard’s stock right now, what risks should I consider? Obviously if they end up going out of business I would lose the money I invested in them.
But what if Dillard’s were to be bought by another company (like Parisian’s was bought by Belk)? Would I lose my investment?
I’m a beginner at this, so please try to explain in a "…for dummies" kind of way lol
Comments
It depends. Lets say you buy Dillard’s at $3. If the company is purchased at $2.00 you’ll have a 33% loss ($1 loss for every share you own).
BTW: Diversification is very important…. more important is "asset allocation".
Read: Mutual Funds For Dummies
the risks are that the stock market has more downside to go and that stocks may drop considerably or maybe go bankrupt which i would expect for some retailers that have their money spread too thin. if your company gets bought out you could gain or lose depending on how much the new company pays for the old company.
July 5th, 2010 at 6:23 pm
Well let’s see… looking at Dillard’s chart http://finance.yahoo.com/q/bc?t=2y&s=DDS&l=on&z=m&q=l&c=dds it looks like they are down 60-70% for the past year.. hmmm… Key statistics page wouldn’t show anything on Yahoo.. hmm.. Retail sector is expected to get a continued beating.. hmm..
"Moody’s Investors Service lowered the corporate family rating of Dillard’s Inc. further into junk status Wednesday and gave the department-store chain a negative outlook due to its poor operating performance."
Income -44.37 Mil
Net Profit Margin -0.57%
Considering all the current stores closing out, the ones that possibly may close out, and the expected sector performance, you want to gamble that some company will pay big time?
Do you want to risk losing it all if the company declares bankruptcy?
Realize that Belk’s bought Parisians in 2006. The stock market was in a different world back then. Many were still in denial of the real estate bubble and it’s imminent collapse.