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Investment Theory and Analysis

For ease in monitoring my portfolio, I decided to divide my total investible funds, $33,333, between the two stocks: Mastercard and Nordstrom. This means that on June 11th, the first day of trading, I have 117 stocks for Mastercard which were purchased at $141. 47 for a total of $16,552 assuming I didn’t pay taxes and related fees for this purchase. This also means that at the same date, I have 319 stocks of Nordstrom worth $16,745 with each stock purchased at $52. 52. By the beginning of the trading period, I have a total of $33,306 in my stock investments.

Nordstrom Nordstrom, symbolized by JWN in the market, belongs to the services sector and specifically to the apparel stores industry. The company currently employs about 53,000 employees all over the globe. Yahoo Finance says that Nordstrom “operates as a fashion specialty retailer in the United States. It sells apparel, shoes, cosmetics, and accessories through Nordstrom, Nordstrom Rack, and Last Chance retail stores, as well as through its Web site at www. nordstrom. com and catalogs” (Nordstrom Inc. (JWN): Company Profile).

As of early this year, the company “operated 98 Nordstrom stores, 50 discount Nordstrom Rack stores, 2 clearance stores, and 1 free-standing shoe store, as well as 4 Fashionable boutiques in the United States, and 36 Fashionable boutiques located in France, Portugal, and Belgium” (Nordstrom Inc. (JWN): Company Profile). The following table shows comparison between JWN and several of the top business services companies by market capitalization. From the above table, the market values Nordstrom’s earnings at par with some of the top companies within the industry.

Although this valuation is still much lower than the rest of the leaders such as Guess (38 times) and Gap (21. 72 times, Nordstrom’s P/E ratio of 17. 92 times is good. The table below shows a comparison between Nordstrom and industry leaders. The table shows that JWN lags in all of the statistical categories compared to the industry leader. Although, in some instances, Nordstrom ranks 2nd, 3rd or 4th, its performance is still very low. Investors make investment decisions by using different criteria.

In choosing Nordstrom over its major competitors such as Bloomingdale’s, Inc. , The Neiman Marcus Group, Inc. , and Saks Fifth Avenue Enterprises, the decision is easy. These top three competitors are private firms, meaning they are not traded in the secondary stock exchanges, and as a small investor I don’t have access to these companies’ stocks. This, however, is not very important since Nordstrom performs better than these three companies as can be seen in the table presented below.

Pvt1 = Bloomingdale’s, Inc. (privately held) Pvt2 = The Neiman Marcus Group, Inc. (privately held) Pvt3 = Saks Fifth Avenue Enterprises (privately held) Industry = Apparel Stores 1 = As of 2005 2 = As of 2006 Source: Nordstrom Inc. (JWN): Competitors The table below summarizes trading history data for Nordstrom. Its beta, which is at 1. 7, means that Nordstrom’s stocks are more responsive to the market, but also means it is a more risky investment. Still, JWN is a good investment.

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