Saturday, February 24, 2007

Stock Pick: Whole Foods Market Inc (WFMI)

I have a new stock recommendation. I am now recommending Whole Foods Market Inc (Nasdaq: WFMI) for purchase. This company is a retailer that operates the largest U.S. based chain of natural and organic food supermarkets. WFMI recently announced its agreement to acquire a competitor, Wild Oats Markets Inc (Nasdaq: OATS). The truth be told, I've been following WFMI for a while. The recent price history of WFMI is a bit rocky. In November, there was a sharp price decline in WFMI after they reported below-expected earnings. It was after this price drop that I started looking into the company. The stock proceeded to drop as low as 42.13.

WFMI stock price had begun to turn around even before they announced the merger with OATS. Immediately after this merger announcement, Whole Foods stock rose $6.41 (14.03%) in one day to close Thursday at 52.11. On Friday, WFMI gave back some of its gain and closed at 50.47. However, the company is still well below its 52-week high of 74.00 for WFMI.

Whole Foods is a member of the Standard and Poors 500 index. Some of the reasons that I have picked WFMI are because of the following:
  • WFMI has been consistently profitable for several years according to the S&P Stock Report. I do not generally recommend investing in unprofitable companies.
  • WFMI has a current dividend yield of 1.6%. I like to know that if the stock price stagnates, that I will still receive some income for having my money tied up.
  • Whole Foods acquisition of Wild Oats expands the chain's market share in several regions.
  • I consider the Wild Oats acquisition to be a long-term positive as the stock price has moved up for both WFMI and OATS. Typically when a larger company acquires a smaller rival, the acquiring company goes down in price and the takeover target goes up.
I firmly believe that WFMI has reversed its downward direction since November, and that the worst is over for its stock price. So Whole Foods Market Inc (WFMI) is now my latest stock pick.

PF Stock

Thursday, February 22, 2007

Discover Card Cash Back at Supermarkets

Get cash back when using your Discover Card. I am not talking about the Discover Card Cashback bonus that you earn for making purchases on a Discover Card. Rather, I'm talking about using the Discover Card in a supermarket, and then choosing cash back as a option during checkout. Here in Silicon Valley, California, I have gotten cash back from Safeway and Nob Hill Foods. You can get up to $50 from Safeway, and $30 from Nob Hill. This works out to be a nice interest free loan, as I pay off the card every month. It also saves me a trip to the ATM. And, I earn cashback on the cash back since it goes on my statement as being a purchase.

Of course, I do not recommend this strategy to people who run a balance on their credit card, and end up paying interest charges on the money.

Does anybody know of other supermarkets that allow you get get cash back on a credit card purchase?

PF Stock

Thursday, February 15, 2007

TurboTax and TaxCut

I have been using tax software to prepare my taxes since 1996. For the first several years, I used TurboTax exclusively. There was one year (I think it was 1999) that Microsoft came out with a program called TaxSaver, but that product has disappeared. Even though I bought TaxSaver, I ended up using TurboTax for 1999. (Note that in this post, I will be referring to the tax year version of the software. The current tax products are for tax year 2006, even though it is already 2007.)

In 2002, I switched to using TaxCut from H&R Block. This was also the year that TurboTax introduced its short lived product activation scheme. To make a long story short, one was not allowed to install TurboTax on more than one computer, and this cause a lot of discontent among TurboTax users. Also, TaxCut is usually cheaper than TurboTax. I stayed with TaxCut until last year when I switched back to TurboTax. I feel this was a mistake, as TurboTax 2005 initially did not allow you to import tax files from TaxCut. Intuit cited "security reasons" as their excuse for not allowing data imported from TaxCut. Intuit later corrected this flaw, but not until after I had already manually re-entered all of my data into TurboTax. I guess that it wasn't really a security issue after all. I could still import my old TaxCut data to TurboTax, but that would wipe out all of the new data that I already entered.

I'm now back to TaxCut for 2006. I mentioned before that I bought this software over Thanksgiving weekend. The import of my TurboTax data from last year worked without a hitch. Going forward, I will probably stay with TaxCut, since I'm pretty much feed up with Intuit TurboTax's shenanigans over the past few years.

Another reason for my choice of tax software is the associated rebate for financial software. TaxCut offers a rebate on Microsoft Money, and TurboTax offers a rebate for Quicken. I suppose that I should cover what I like about Microsoft Money vs. Quicken in another post.

I have always used the Deluxe or Premier "desktop" version of the tax software, which includes a copy of the state version of the tax preparation software. However, an online version is available for both TurboTax and TaxCut, which I have not used. I also haven't tried using e-file yet, but I might consider it.

So, what tax software does everybody else use?

PF Stock

Saturday, February 10, 2007

The 1099 Form You Have is Wrong

By now, you should be receiving the last of your 1099 forms from banks and brokerages for tax year 2006. I have all the data that I need to prepare my tax returns. Unfortunately, if I were to do my taxes now I'd only have to do it over later when the CORRECTED 1099 forms arrive. It is a running theme lately, but I can't remember a year when I haven't had to re-figure my taxes due to updated numbers on my tax forms.

For me, the usual suspects are mutual funds (especially foreign funds), Exchange Traded Funds (ETFs), tax-free bonds, and dividend paying stocks. This year, the Internal Revenue Service (IRS) added two new boxes on the 1099-INT form that report tax exempt interest, and the amount of tax exempt interest that is subject to the Alternative Minimum Tax (AMT). For mutual funds, there are four categories of distributions: long-term capital gains, short-term capital gains, dividends and non-qualified dividends. Mutual funds sometimes classify their distributions incorrectly and need to re-classify them properly. ETFs will sometimes declare a distribution in December, but not pay you until January. Unfortunately, you need to pay taxes on these funds in your prior year's taxes. Sometimes, foreign mutual funds need to calculate the foreign taxes paid by the fund. This calculation usually takes a couple of months for them to figure out. Foreign taxes paid can be taken as a credit on your U.S. taxes. And, I've had instances where the broker listed tax-free interest as taxable interest. For dividend paying stocks, I've sometimes seen the dividends characterized incorrectly as non-qualified dividends when they were actually qualified dividends (which have preferential tax treatment).

The corrected 1099 forms are sometimes further corrected. In one case, I didn't get my last 1099 corrected until April! Some of my brokers have already informed their clients that corrected 1099 forms are not expected to be mailed until March. In another case, I can already predict that one of my 1099 forms is incorrect, and I'm already waiting for a correction. These issues are usually resolved by themselves by the brokers or banks, but it often takes them a while. I owe taxes this year, so I probably won't be finishing my taxes until April anyway. For people expecting a refund, it can be a hard call. You want to get your refund back quickly, but you wouldn't want to have to file an amended tax return later...

What do you think?

PF Stock

Monday, February 5, 2007


I have recently been seeing ads for SogoInvest, an online discount brokerage. They have advertised brokerage commissions as low as $1 per trade, for the first 90 days. Their regular commission pricing is a bit confusing to me, but I think that the bottom line is that their commissions vary from $1-3 depending on whether you pay a "subscription fee" and whether your trade is automatic or real-time.

I don't intend to go over the SogoInvest commission chart in detail here. But, from what I see, stock trading commissions are continuing to go down. In my previous post about comparing online brokers, I talked about the E*TRADE and TD Ameritrade brokerages that I use. I stated that when commissions dropped significantly below $20, I stopped paying attention to commissions. But, it is nice to know that there is still competition in this arena.

What does this all mean to individual investor? I'm not 100% sure. In addition to the brokerage commission, brokers make a profit on what is known as the spread. When you buy a stock, you pay the ask price, and the seller receives the bid price. This difference is usually only a few cents per share, and may be as low as a penny. My assumption is that this difference is divided up among the different brokers and the stock exchange.

In any case, I would like to know if anybody has opened an account with SogoInvest? How does it compare against the other brokerages that you've used? How is their customer service, and what sort of special services do they offer? I'm especially interested to know if anybody had a bad experience or other problem. I would like to hear your opinions and input.

PF Stock

Thursday, February 1, 2007

Early Retirement Housing

In October 2006, I wrote about Billy and Akaiska Kaderli, a couple who retired early, while they were still in their 30s. Over the years, the couple has been able to keep their expenses very low -- about $24,000 annually. So, in my post, I posed a question to my readers, "do you think that you could live off $24,000 a year?"

One of the ways that Billy and Akaisha are able to cut back their expenses is through their choice of housing. A couple of months ago, the Kaderlis sent me a link to an article on their Retire Early Lifestyle website where they wrote about active adult communities. I believe that the residences depicted in the article are similar to the type of accommodation that the Kaderlis have in Mesa, Arizona. Formally, their home would be referred to as a manufactured home, but it is also commonly called a mobile home. In this article, they show one mobile home that cost only $7,000.

Personally, I don't think that my wife and I would ever choose to live in a mobile home. On the other hand, Billy and Akaisha can say that their house is paid for. And, I don't think that the majority of us could say the same thing about our housing situation...

In the October 2006 Kiplinger's Personal Finance article "Extreme Early Retirement" which profiled Billy and Akaisha Kaderli, one statement stood out as being confusing to me:

Sixteen years after they retired, they are now both 54 -- almost old enough to satisfy the minimum age requirements of the active-adult community in Mesa, Ariz., they call home (when they're not traveling around the world).

I presumed that the minimum age for their active adult community is 55 years old. So, I asked Akaisha to clarify this point. She said that they bought their home when they were about 39. At that time, there were no age restrictions for their community. Later, their place became an "age restricted" community, as some active adult communities are. Since they already lived there before that age requirement became a rule, they were grandfathered in.

One question that I did not have the opportunity to ask the Kaderlis is "How do you think your lives would be different if you had children?" The rules concerning active adult communities generally require that one occupant be at least 55 years old, and generally prohibit children under 18 from residing permanently in the community. So, I suppose that their choice of housing would be one significant difference.

PF Stock