Why Family Dollar Is an Activist Investor Target

When Carl Icahn tweeted that he had bought a 9% interest in Family Dollar (NYSE: FDO  ) , investors knew something big was brewing.

This dollar store chain is worth considerably more than that after the arrival of activist investors. Photo: Flickr user Mike Mozart.

While other marquee activist investors had taken large stakes in the lagging dollar store chain -- Nelson Peltz even tried to buy the company for $7 billion in 2011 -- Icahn's arrival carried an air of expectancy. For good or ill, he's not typically someone who sits on his hands, and it's not long before the pot is stirred.

But what about Family Dollar attracted Icahn and his peers?

Suburban sprawl
With more than 8,200 locations stretched across 46 states, Family Dollar is the second-largest dollar store chain, behind industry leader Dollar General (NYSE: DG  ) , which boasts more than 11,300 stores, and firmly ahead of No. 3 player Dollar Tree's (NASDAQ: DLTR  )  5,100 stores.

Yet despite its reach, Family Dollar has straggled behind its rivals. As Icahn himself was soon to make clear, the chain has underperformed the competition on virtually every measure and its stock has lagged the broader market over the past one- and three-year periods.

In an economic environment that ought to be favorable to dollar stores -- and for both Dollar General and Dollar Tree it has been -- Family Dollar has been unable to cash in. It was imperative, Icahn said, that the company "be put up for sale immediately" as a result.

Price is what you pay
At one end, Dollar Tree has marked out its territory as the go-to deep discounter. Almost everything it sells costs exactly $1, which helps a penny-pinching consumer keep a firm grasp on his or her budget when entering the store. By expanding the amount of consumables it offered, particularly in the frozen food section, along with adding brand names to its shelves, Dollar Tree has made itself indispensible to the tight-money customer.

Growth is slowing everywhere, but Family Dollar still lags. Data: Company SEC filings.

Dollar General, on the other hand, has succeeded by offering a range of values to customers, while also keeping a handle on costs. It's revenue might not grow as fast as that of Dollar Tree, and it might earn a little bit less on operating margins, but its national sprawl has kept it in front of consumers who are looking to save when shopping.

Meanwhile, Family Dollar went from being the premier dollar store chain to falling by the wayside. More closely following the Dollar General script, it too offered a range of price points, but until recently it was tending toward the higher end. That seemed to confuse shoppers who entered looking for extreme bargains but came away with the feeling that this was a "dollar store" in name only.

Value is what you get
Belying the economic recovery, consumers who went down market during the recession largely haven't upgraded again. The well-off might be doing better, but the middle class continues to be ground down.

According to the analysts at Sentier Research, inflation-adjusted median household annual income as of June was down 3.1% since the economic recovery supposedly began in June 2009, and off nearly 5% below where the recession started in December 2007. It's just starting to improve, but these numbers explain why dollar stores are still a popular destination with shoppers.

Dollar Store Operating Margins | Create Infographics

Family Dollar's management belatedly realized that its pricing policies were putting it more in competition with mass retailers like Wal-Mart (NYSE: WMT  ) than with other dollar stores, not an easy game to win, and earlier this year it cut prices on some 1,000 items.

it might be too little, too late for Family Dollar to recover and why Icahn said it was time for management -- and the company -- to go.

He who hesitates is lost
While the billionaire's favored acquirer, Dollar General, dithered on making an offer, despite supposedly being in favor of a union, Dollar Tree stepped up with an $8.6 billion bid that management accepted. Too late, Dollar General countered with a higher offer and then raised it to $9.1 billion and a pledge to shed hundreds of stores to get over Family Dollar's worry over antitrust regulations.

A Dollar General-Family Dollar tie-up makes sense as they have similar retail strategies, but a 19,600-store-strong chain, even if a bunch were sold, might be too high a hurdle to overcome. But the fact that Dollar Tree is willing to keep on Family Dollar's CEO after completion of the deal and Dollar General has not made that commitment probably sweetens the pot in favor of the former.

So long, goodbye, see you later
Shares of Family Dollar have soared almost 30% since the drama began; Icahn has since sold out of his position in the dollar store chain, indicating even he felt the bidding war wouldn't go much higher.

All told his entrance on the scene heralded big changes, underscoring the dysfunction at Family Dollar. It took a deep-pocketed investor to step forward and make the change happen. Regardless of which company ultimately wins the merger battle, Family Dollar will be a different experience afterward for consumers.

Here's another big-name investor looking to cash in
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New iPhone Not Working Up to Par? Here's Your Fix

Marcio Jose Sanchez/AP Apple (AAPL) withdrew a faulty update to its latest operating system after many users of its new phones complained of call service disruptions, the latest in a series of glitches to mar the first week of iPhone 6 and 6 Plus sales. Apple shares fell as much as nearly 4 percent to $97.72 in early trading Thursday, to be the biggest drag on the Nasdaq composite index (^IXIC). At that price, the stock had lost all its gains since the launch of the latest iPhones and the company's market value declined by $24 billion. "We apologize for the great inconvenience experienced by users, and are working around the clock to prepare iOS 8.0.2 with a fix for the issue, and will release it as soon as it is ready in the next few days," an Apple spokesperson said, according to a report on technology news website Re/code. Apple officials weren't available immediately for comment. Users of the iPhone 6 and 6 Plus, which started selling the new phones last Friday, complained about a drop in cellular service and inability to use the fingerprint-reading Touch ID after updating the operating system to iOS 8.0.1. Apple issued a step-by-step guide for users to reinstall iOS 8, launched last week, through the latest version of iTunes. Its health app won't work after the reinstallation, but will be fixed in iOS 8.0.2, the company said. Some users had complained of "sluggish Wi-Fi and dwindling battery life" after updating to iOS 8 on Twitter and Apple forums, Time magazine reported earlier this week. The new phones also face criticism over their bendability, dubbed "bendgate" on social media and online forums, which have been abuzz with comments about how the new phones can bend when placed in back pockets or while wearing skinny jeans. The phones' lightweight aluminum shell is more malleable than expected but this may not qualify as a design flaw, some analysts said. Apple said Monday it had already shipped 10 million units of iPhone 6 and 6 Plus, but didn't comment on the bending reports. Rival smartphone-makers have tried to take advantage of Apple's problems. Samsung released an advertisement showcasing a bending phone against its own product, while BlackBerry (BBRY) Chief Executive Officer John Chen said: "I would challenge you guys to bend our Passport." Apple shares were down 3 percent at $98.73 on the Nasdaq just after midday.

Affected: 56 million cards. Duration of compromise: Five months. Tactic: Malware was installed to skim payment card data; unclear how hackers found an entry into the company's network.

Gas Pressure on Investors

Consumer's delight has always been the pain of investors. Promotional pricing means good news for consumers as they can bag in more for less money however on the other hand it reduces the margin of the company which results in fall of earning per share consequently share price taking a hit. Diners love Olive Garden's unlimited breadsticks, but according to an investor, the Italian chain's parent company, Darden Restaurants, needs to cut back on the carb fest in order to reach peak profitability. Thus it proves that the joy of the two sides of the business the consumer and the investor are inversely proportional.

The shares of Exxon Mobil Corporation (XOM) and Chevron Corp. (CVX) are also somewhat headed in the same downward direction as the investor' joy. Let's take a better look at what is happening in the world of gas prices.

Falling Gas prices is it a relief or a pain???

Falling gas prices are bringing smiles to myriads of consumers but at the same time burning a hole in the pockets of the investors. In a new energy outlook report, the U.S. Energy Information Administration said this week that gas prices, which fell to an average of $3.49 per gallon in August (12 cents lower than the July average and 21 cents under June's average), are poised to continue their downward trend and will hit an average of $3.18 per gallon by December, the lowest monthly average since January 2011.The EIA has also declared that there are significant pricing differences across regions, with monthly average prices in some areas falling above or below the national average price by 30 cents per gallon or more.

GasBuddy.com a gas tracking site has also predicted that the gas prices are on its journey downhill and will dip below $3 per gallon by December 2014 for the first time in nearly four years. The $3 per gallon price mark might be reached sooner than December by certain parts of the company. Currently the residents of Roanoke, Virginia enjoy the competitive gas price at $3.75 per gallon and the price in Spartanburg, South Carolina stands at $3.85.

Such fall in price is due to the fall in crude (CLV4) prices and better supply chain. The crude price has seen a steep dip of 12% lower price as compared to their prices in June. Furthermore prices of Crude futures closed at $92.08 on Friday, an 0.8% decline for the day. With the rise in supply of crude it has become increasingly difficult to hold on to the prices and hence it has stated seeing a quick slip. According to the EIA estimates U.S. crude production averaged at 8.6 million barrels a day in August, the highest monthly production since July of 1986. However with the advent of the latest automobile technology and added focus on emission norms and fuel efficiency of cars, the demand for crude has weakened considerably.

In the words of EIA as published in a press release earlier this week, they said "As new cars replace less-efficient older cars, the increase in the average fleet fuel economy is expected to outpace the growth in the driving age population and vehicle miles traveled and put continuing downward pressure on gasoline consumption."

Another Energy analysis by Citi research analyst, Seth Kleinman, expressed that the global crude market is oversupplied by 400,000 barrels of oil a day, and adding oil products to the market only doubles this oversupply which could lead to adding to the blues of the oil companies. Now that the Libyan crude export counter has regained life, with production reportedly up to 725,000 barrels per day despite the domestic turmoil and Iranian exports standing steady at around 1 million barrels per day, it is evident that the global market is flooded by crude supply which is affecting the price downhill. Kleinman also wrote that if the demand stays at their current level and does not see a sudden rise the pressure on OPEC will rise to slow down production and exports.

Oil Companies in the Gas Pressure Canister

Due to the weakening demand of the crude energy sector stocks have seen the downside this week by 0.5%. The effect of this pressure is more drastic on oil company giants like Exxon Mobil and Chevron. While the share prices of Exxon Mobil has dropped by 2.5% since the start of this week Chevron is the worst hit oil company trailing its peer at a drop of 2.7% since beginning of this week. In the Friday trading session the stocks of Exxon Mobil and Chevron were among the Dow Jones' biggest laggard performers. In the Friday session alone the price of Chevron plummeted by 1.08% and price of Exxon climbed down by 1.22% after the news flash that the current sanctions on Russia could adversely affect its arctic drilling project worth $500billion with one of Russia's largest oil companies. Meanwhile, the United States Oil ETF is stood flat for the week moving up by 0.03% but also came down a little more than 1% in Friday afternoon trading session.

How to Handle this Crude Pressure???

As a wise individual investor or analyst it would be best to hold on to our current positions in these oil companies till the time is ripe with growing demands also at these prices it would be quite lucrative to buy in a few more positions. Simultaneously it would be wise to en-cash on this downtrend opportunity by playing short on these stocks and trading in the put options of these oil company stocks with adequate risk hedging.

Friday, September 19, 2014 What Price Love? Remarrying Can Cost You Social Security Benefits Getty Images Many retirees rely heavily on Social Security: The Social Security Administration reports that more than half of married couples and almost three-quarters of single retirees get at least half of their income from the program in retirement. For those who've been married previously, Social Security commonly pays two types of benefits: spousal benefits (for divorced spouses who qualify) and survivors benefits (for those whose spouses have passed away). But of course, being divorced or widowed doesn't mean you're destined to stay alone. New love may surprise you. But if that relationship grows, it could lead to a much less pleasant surprise: discontinued Social Security benefits. What Divorced Spouses Must Consider Social Security recognizes the potential financial damage a divorce can do, and so it provides many divorced spouses with the same benefits they'd be entitled to receive if they remained married. Specifically, if you were married for at least 10 years, then you can claim spousal benefits based on your ex-spouse's work history. Even if your ex-spouse remarries, you don't lose your Social Security benefits. That also doesn't reduce anyone's benefits; both you and your ex's new spouse both can claim spousal benefits if the necessary conditions are met. But once you remarry, you become entitled to take spousal benefits based on your new spouse's work history after a short waiting period. But you lose the ability to claim benefits based on your ex-spouse's work record. If your ex had a higher income than your new spouse, then you could see your benefit shrink as a result. For Surviving Spouses, Social Security Is More Complicated If your spouse dies, then you'll be entitled to receive survivors benefits. Those benefits typically equal your spouse's retirement benefit, which is usually substantially higher than spousal benefits. Like those who've divorced and whose ex-spouse is still living, widows and widowers face some potential pitfalls if they remarry. But with surviving spouses, Social Security's rules are more complex and seem almost arbitrary. For most surviving spouses, if you haven't yet reached age 60 and get remarried, then you won't be entitled to survivors benefits based on your deceased former spouse's work history. Instead, you'll have to claim spousal benefits from your new spouse and potentially get survivors benefits on your new spouse's work history in the future. Rules Change for Older People But if you're 60 or older, Social Security treats you differently. Even if you remarry, you're still entitled to survivors benefits on your deceased former spouse's work record. Again, you're not allowed to double-dip, as you'll only be entitled to additional benefits if they exceed what you're getting as a surviving spouse. Nevertheless, the rationale for putting people younger than 60 in jeopardy of losing benefits while those 60 or older face no such worries isn't entirely clear. As if that weren't enough, you can sometimes get back benefits even if you initially lost them. If a second marriage also ends in death or divorce, then you may be able to claim benefits based on your first spouse's work history. Understanding the intricacies of Social Security as a spouse can be tough. But given the potential for problems if you don't consider the financial implications of marital decisions, it's important to get a handle on the rules so you can make an informed choice. More from Dan Caplinger •The Must-Know Tactic to Boost Your Social Security Benefits •How the Death of Cash Could Hammer Small Businesses •3 Things Every Spouse Must Know About Social Security Wednesday, September 17, 2014 Stocks Gain as Fed Leaves ‘Considerable Time’ Intact Stocks rose, fell, and are rising again after the Federal Reserve left “considerable time” in its statement. Agence France-Presse/Getty Images The S&P 500 has gained 0.3% to 2,004.23, while the Dow Jones Industrial Average has advanced 0.3% to 17,174.93. The Nasdaq Composite has advanced 0.4% to 4,570.25. CRT Capital’s David Ader tries to decide whether the Fed release leans dovish or hawkish: Fed keeps language re considerable time intact, which could have been dovish, but with dots moving up (in part due a change  in increments) the market apparently reads this as hawkish.  That’s overblown in our view and given the subdued inflation language, labor slack, and moderate expansion expect that when they due remove they’ll attach data dependent and something a bit dovish to soothe. The Lindsey Group’s Peter Boockvar says the stock market, which is rising, and the bond market, which is falling, are looking at two different things: The FOMC still believes that there is a "significant underutilization of labor resources" after acknowledging that "labor market conditions improved somewhat further" and also said that "it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after" QE ends… In the June forecasts where each member predicted where the fed funds rate would be by year end 2015, it was 1.13% on average. The new forecast has an average of 1.375% and this compares with the December 2015 fed funds futures contract which was trading at .74% prior to the release of today's statement… Bottom line, we can easily argue that the statement was dovish as the two key wordings were left in but the Dot forecasts are more hawkish and that is what the bond market is responding to. The stock market is focused on the statement, the bond market and its selloff is focused on the dots. The folks at Societe Generale think the fact that the Fed laid out an exit strategy is hawkish: The FOMC also published the official set of exit principles. There were no surprises here in terms of the sequence and the tools, but the mere fact that they put this out today rather than December adds to the overall hawkish tone of today’s meeting. Here’s a chart of the S&P 500′s move today: That S&P 500–always the optimist. Newmont Mining: With Overhang Removed, Will Shares Head Higher? Yesterday, Newmont Mining (NEM) withdrew its arbitration claim against Indonesia. Sterne Agee’s Michael Dudas and Satyadeep Jain are encouraged by the news: Bloomberg News Newmont has withdrawn international arbitration filing following encouraging developments and discussions with the Government of Indonesia. Signing of the agreement should pave the way for ramp-up of copper concentrate production and exports from Batu Hijau. This encouraging news helps to remove an overhang for the shares… Newmont’s shares underestimate where gold prices may trade, in our view. As longer-term plans emerge supportive to margins and returns, we believe Newmont’s valuation should regain support based on its assets, commitment to cash flow, and margin and balance sheet strength. Dudas and Jain call Buy-rated Newmont their “favorite large-cap North American gold equity,” topping the likes of Hold-rated Barrick Gold (ABX) and Buy-rated Agnico-Eagle Mines (AEM). Shares of Newmont Mining have dipped 0.1% to $26.48 at 10:32 a.m., while Barrick Gold has fallen 0.3% to $18.14 and Agnico-Eagle Mines has fallen 0.2% to $37.27. Tuesday, September 16, 2014 Awkward: Sears borrows $400M from its CEO NEW YORK (CNNMoney) Talk about awkward. Sears secured a $400 million loan this week from a hedge fund whose sole shareholder is the struggling retailer's chairman, CEO and leading investor. The unusual agreement -- and what it signals about the overall health of Sears (SHLD) -- spooked Wall Street. Shares of the retailer plunged another 9% on Tuesday to the lowest level sine February. "It's shady because there is clearly a conflict of interest here," said Brian Sozzi, who closely tracks the retail industry as CEO of Belus Capital Advisors. Devil's in the details: Sears, which lost $1 billion during the first half of the year, revealed the loan in a vaguely-worded regulatory filing late Monday. The company said the the short-term loan is being provided by entities tied to ESL Investments, whose sole stockholder and CEO is Sears head Eddie Lampert. ESL Investments controls 24.8% of Sears's outstanding shares, making it the No. 1 stockholder. Lampert himself is listed as owning 23.7% of the company's outstanding stock. The filing said the loan, which carries an annual base interest of 5% plus upfront fees of 1.75%, is being secured by 25 unspecified properties. Presumably that means some of the company's hundreds of Sears and Kmart stores. Collateral damage: The fact that Sears didn't disclose which properties are being used as collateral is raising eyebrows. The loan even gives the lender (Lampert) the opportunity to swap out certain stores with other ones. As pointed out by Yahoo Finance, the $400 million loan values each store at just $16 million. That's a steep discount to the $20 million to $50 million Sears has typically been selling its stores for to other retailers and investors. It also seems cheap given the $5 billion of real-! estate assets listed on the Sears balance sheet. "We don't even know all the deal terms. Are shareholders getting a raw deal here? Did Lampert undervalue the stores?" said Sozzi. For its part, Sears said in a statement to CNNMoney that the deal does not create a conflict of interest and is in the "best interest of the company." Even if the deal terms are fair for Sears shareholders, the fact the loan is needed doesn't bode well for the company's sales metrics, especially as it heads into the critical holiday period. Last month, Sears revealed its ninth straight quarterly loss amid deep discounting. The company was forced to raise $500 million earlier this year by spinning off Lands' End (LE). "The loan tells you the company is having another challenging start to the third quarter. They are going to enter the holiday season with zero momentum," said Sozzi. Sears said the loan "allows us additional financial flexibility, particularly as we enter the holiday season." The company said it wants to be "proactive" in showing vendors and others it will "continue to generate liquidity needed to invest in our business and meet all of our financial obligations." Cash concerns persist: Despite the cash infusion, Sozzi said he still believes Sears is barreling towards some sort of wind down by 2017 due to a cash crunch. He's not the only one worried about a possible restructuring. Last week, Fitch Ratings slashed its credit rating on Sears further into junk territory due to cash-burn concerns. The ratings company cited the deep plunge in profitability and "lack of visibility to turn operations around." Many shareholders blame Lampert for the company's struggles. "He will go down as the man who ruined a national icon in Sears," he said. Sunday, September 14, 2014 American Airlines: Recent Selloff ‘Great Buying Opportunity’ Wolfe Research’s Hunter Keay and Jared Shojaian note that analyst earnings forecasts for American Airlines’ (AAL) have risen much faster than its stock: We looked at how 2015 consensus EPS estimates have changed YTD compared to YTD stock performance for the airlines we cover. Simplistically stock prices should trend with changes in consensus EPS estimates, all else equal. P/E multiple contraction/expansion occurs when they don't. American Airlines the most out of sync to the upside. American Airlines’ 2015 consensus EPS estimates have increased 63% YTD while American Airlines’ stock is up just 56% YTD. American Airlines is the only U.S. airline stock we cover whose estimates have grown faster than the stock, implying YTD P/E multiple contraction. It's also worth noting that 2015 consensus EPS estimates for American Airlines still feel too light to us. If numbers keep going up, which we think they should, then it seems the stock should go up, too. The recent selloff seems like a great buying opportunity. JetBlue (JBLU) and Spirit Airlines (SAVE) have both seen their stock prices rise more than analyst earnings estimates. For JetBlue, Keay and Shojaian think its move is “based on event-driven factors,” while Spirit’s is “due to investors realizing that the current multiple is out of sync with other high-growth companies.” Shares of American Airlines have gained 1.4% to $40.06 at 1:19 p.m., while JetBlue has advanced 0.9% to $12.59 and Spirit Airlines has jumped 2.6% to $72.95. Friday, September 12, 2014 Canada’s Surge in Productivity In addition to Canada's strong resurgence in economic growth during the second quarter, the country may have also experienced a key turning point in an area that has long vexed its policymakers: labor productivity. According to Statistics Canada (StatCan), the labor productivity of Canadian businesses jumped 1.8 percent in the second quarter, exceeding the consensus forecast by two-tenths of a percentage point. But more important than that, this performance was the highest quarter-over-quarter rise in 16 years. And on a year-over-year basis, labor productivity was up 3.3 percent. Still, it's too soon to tell whether this is the start of a new trend toward higher productivity. Over the trailing five-year period, for instance, labor productivity has grown at an average rate of just 0.32 percent per quarter. And prior to this latest result, over the trailing-year period that ended March 31, labor productivity increased at an average rate of 0.55 percent per quarter. Sure, that's a modest improvement, though it's still underwhelming overall. But this is hardly a new problem. In fact, when it comes to labor productivity, Canada's been a longtime laggard compared to its developed-world peers. According to the Organization for Economic Cooperation and Development (OECD), from 2001 through 2009, labor productivity grew just 0.7 percent annually, which puts Canada in the bottom quartile of that entity's member countries. The boost to efficiency that typically comes from business investment seems to be the main culprit here. According to Deloitte, a major accounting firm and consultancy, Canadian companies invest less than half of what US firms spend on research and development. And on a per-worker basis, expenditures on machinery and equipment are just 65 percent of what US firms spend, while Canadian companies invest just 53 percent as much as their US peers on informat! ion and communication technology. Even the rock star of central banking, former Bank of Canada (BoC) Governor Mark Carney has previously described Canada's past performance on the productivity front as "abysmal." Of course, that hasn't stopped our average stock recommendation from producing enviable returns. So it's easy to imagine what a boost to labor productivity will do for companies' bottom lines–and ultimately our Portfolios. And in keeping with the spirit of friendly rivalry between the US and our neighbor to the north, we'll note that Canada's growth in labor productivity has outpaced the US in five of the past eight quarters, with three consecutive quarters of outperformance most recently. So what changed during the second quarter? Interestingly, according to StatCan, even as labor productivity surged, the number of hours worked fell by 0.8 percent from the prior quarter. Meanwhile, labor costs per unit of production increase by 0.3 percent, which was just one-third the rate of the first quarter. According to The Wall Street Journal, Douglas Porter, the chief economist of BMO Capital Markets, believes the sudden rebound in productivity could be partly the result of the economy shifting from its dependence on debt-burdened consumers and real estate to rising exports and business investment. Those just happen to be two of the BoC's fixations since Stephen Poloz took the helm of the central bank last year, so they're foremost in economists' minds (and ours as well). Mr. Porter notes that growth resulting from real estate and consumer spending tends to create jobs, though it doesn't do all that much for productivity. By contrast, greater export activity and business investment leads to higher productivity, but doesn't translate right away into job growth. On the other hand, TD Economics believes the gain in productivity could be more cyclical in nature, perhaps reflecting the disconnect between the country's dis! mal emplo! yment market and growing economy. If hiring picks up, then productivity could moderate. Regardless, we like to look at which sectors had the greatest gains in productivity for possible investment themes. On that score, the retail trade, mining and oil and gas extraction, manufacturing, and wholesale trade sectors were the largest contributors to the rise in overall productivity during the quarter. Friday, September 5, 2014 Wall St. drools over El Pollo Loco's earnings El Pollo Loco has 401 restaurants, mostly located in California. NEW YORK (CNNMoney) Wall Street seems to have a hankering for some crazy grilled chicken. Shares El Pollo Loco's stock rose as much as 5% Thursday evening after the company released earnings for the first time since going public. El Pollo Loco said quarterly sales are up about 6%. It also turned a profit, earning $6.1 million compared to the $410,000 it made during the same quarter last year when the company was still private. It went public on July 25, opening at $15 per share and immediately jumping 60% to finish the day above $24. Shares closed Thursday at $34.79. The California-based restaurant chain specializes in Mexican-style grilled chicken. It competes with Chipotle Mexican Grill (CMG) and other fast-casual restaurants like Chick-fil-A and Yum! Brands (YUM) KFC. El Pollo Loco (LOCO) has 401 company-owned and franchise locations in five states, including Texas and Arizona. But the vast majority of its restaurants are in the Golden State.   El Pollo Loco en fuego after IPO The company said Thursday that it expects to open more than a dozen new stores before the end of the year, including its first in the Houston area. Wednesday, September 3, 2014 3 Value Stocks You Should Consider Just as we often examine companies that may be rising past their fair values, we can also find companies trading at what may be bargain prices. While many investors would rather have nothing to do with stocks wallowing at 52-week lows, I think it makes a lot of sense to determine whether the market has overreacted to a company's bad news, just as we often do when the market reacts to good news. Here's a look at three fallen angels trading near their 52-week lows that could be worth buying. An organic panic Given how organic and natural food producer Whole Foods Market (NASDAQ: WFM  ) has traded since last October, you'd think the business model blew up. Shares have dropped by nearly 40% as a mixture of increasing competition and higher food costs have weighed on the usually sure-footed investment. Source: David Shankbone via Wikimedia Commons. However, after missing Wall Street's earnings-per-share estimates in its two previous quarters, Whole Foods got back to business in the second quarter, reporting a total sales increase of 10% to a record $3.4 billion as comparable-store sales rose by 3.9%. The company noted that both transactions and checkout totals improved, which ultimately helped boost comps.  Though competition remains a concern for Whole Foods Market, I believe it has the tools necessary to continue growing at a high-single-digit percentage, if not better. For one, it's not as if consumers have given up on organic and natural foods. In fact, as you walk around your local supermarkets today, you're likely to find that the selection of organic and natural products is as big as ever. Consumer groups continue to push for more transparent food group labeling, and as this movement gains momentum, the consumer demand for large-scale organic grocers should keep Whole Foods' growth on track. Source: Ines Hegedus-Garcia via Flickr. Second, don't forget that while smaller organic grocery chains might be growing more quickly than Whole Foods, this company's size gives it the ability to negotiate better deals for its produce and other products. Ultimately, I expect this will allow Whole Foods to deliver more impressive margins than its peers over the long run. Finally, Whole Foods is also a champion of employee rights and does well by its shareholders. Whole Foods ensures that its executives don't take home exorbitant pay packages relative to its in-store employees, and it has been regularly buying back its own stock and offering investors what currently amounts to a 1.3% dividend yield. This gives Whole Foods a positive image, which can go a long way toward improving customer traffic. As both a growth and value stock, Whole Foods certainly looks worthy of a deeper dive. Worldwide bargain? Lower and lower it goes; where Web.com Group's (NASDAQ: WWWW  ) bottom is, nobody knows. Shares of Web.com Group, a supplier of Internet-based solutions such as hosting, website design and management, and search engine optimization for small businesses, have gone cliff diving following the company's last two earnings reports and are off about 50% from their all-time high set in March. In the second quarter, the company delivered $144.7 million in revenue compared to Wall Street's consensus forecast of $146.9 million. This top-line miss, compounded by reduced full-year EPS estimates from Wall Street and the company's remaining $513 million in net debt, have given traders enough reason to believe Web.com's best days are in the rearview mirror. Source: Web.com Group. However, I see this dip as a potentially attractive buying opportunity. Dissecting Web.com Group's earnings report a bit further yields some nice surprises. Quarterly revenue, while off the mark, still rose by 10% year over year. More important, average revenue per user rose $0.14 from the sequential first quarter and $0.80 year over year, to $14.89. That might not sound like a lot, but it implies that Web.com is retaining strong pricing power and, based on its net additions during the quarter, not chasing away clients with its pricing or quality of service. I also wouldn't underestimate the niche space in which Web.com operates. Most small businesses really aren't aware of how to increase the viewership of their product or service. Web.com's personalized services, which on the high end will run about $276 per year, are relatively inexpensive and can practically walk a new business owner through the process of targeting his or her audience via online and mobile Web designs, as well as search engine optimization. By comparison, Adobe Systems offers similar cloud-based business optimization tools, but its services start at $360 per year. Even with slightly reduced growth expectations and sizable debt levels, I'd say Web.com is a potential steal at just seven times forward earnings. Given its long-term growth rate of about 8%, which would place the company at a PEG ratio below one, I suggest investors give this value stock a closer look. Bursting with paw-tential No stock goes straight up, but between 2009 and 2014 it was a steep uphill ride for stakeholders in animal health products company MWI Veterinary Supply (NASDAQ: MWIV  ) , who saw their shares rise in value by more than 700%. But all good things must end, and shares of the company have dipped by more than 20% from their all-time high set earlier this year. As with Web.com, the culprit was a weak second-quarter earnings report in May that saw the company produce $1.32 in EPS, which was $0.05 below what Wall Street anticipated. While operating income increased in the second quarter, gross margin fell by 70 basis points. For a company that had run higher by more than 700%, investors were clearly expecting more. The good news is that I fully expect MWI to deliver more to patient value investors who are primed for a long-term hold. The way I see it, there are both company-specific and macroeconomic reasons why MWI Veterinary Supply can outperform. Source: William Warby via Flickr. MWI's purchase of IVESCO, which closed in November of last year, should help expose the company to a broader base of companion animal and production animal customers. Having a broader product portfolio than before the buyout should allow for substantially better pricing power and give veterinary practices and commercial animal producers a reason to stay loyal to MWI. On a larger scale, both the companion and commercial markets are likely to see increasing demand for all supplies, ranging from food to medicine. On the companion side of the market, more U.S. households own a pet now than at any time previously. In 1988, according to the American Pet Products Association, just 56% of all U.S. households owned a pet. As of 2013-2014, that figure had jumped to 68%, with 2013 pet expenditures totaling a whopping $55.72 billion in the nation. Put simply, people will do anything for their "family member," and that means spending quite a bit to keep them healthy. On the commercial side of the business, a growing global population bodes well that the demand for vaccines will remain high. At 22 times forward earnings, MWI Veterinary Supply's "value stock" status may look questionable, but having a long-term projected growth rate in the double-digits, coupled with these aforementioned pet expenditures, could lead to decades of success for MWI. If you want value, look no further than these high-yield dividend stocks handpicked by our top analysts!  The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now. 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