Purchased More Target Corporation Stock

The Value Investment Fund purchased a second tranche of Target Corporation. Today, the 10th of November, the price dropped below $90 per share for Target. The facilitator purchased another 200 shares of Target Corporation. The company authorized a $1.14 dividend on 11/12/25 (ex-dividend date). Total purchase outlay is $18,200 for 200 shares at $90 each, plus a $1 per share transaction fee.

This tranche now makes 700 shares total. Target’s intrinsic value is determined to be around $122 per share. Expected recovery to the $150 range is less than two years. In the interim, the stock earns $4.56 in dividends, which is a comfortable 5.01% annual return on a $91 investment. In this case, the Fund gets an immediate return on Wednesday (today is Monday) and therefore, the real investment is $89.86, bumping the yield to 5.07%.

The Value Investment Fund utilizes four core principles. First, the Fund only invests in low-risk investments (top 2,000 companies); in this case, Target Corporation is #288 in the S&P 500. Secondly, the Fund has determined the intrinsic value of Target to be $122 per share and requires a 22% discount against the intrinsic value, referred to as the margin of safety, to buy the security. Thus, a good margin of safety is to buy the stock when it is less than $95 per share. Third, security analysis reveals that this company has not lost money in the last 23 years and currently earns about $8 per share annually. This equates to a PE ratio of less than 12, which is outstanding for a company that has sales greater than $100 billion per year (Target is the eighth largest retailer in the United States). Finally, patience is key. The company is currently experiencing some retrenchment with sales of about 1% per year. The average investor would be concerned about this, but Target experienced a 35% growth from 2019 through 2022. Given the current economic indicators, the facilitator has built into the intrinsic value calculation an expected two more years of 1% retrenchment with sales. Target is working on programs to expand its sales, and it will take time for these to mature and register results.

In addition, anytime the Fund can find a dividend-paying investment that has an annual dividend yield of more than 5%, along with a stronger margin of safety than predetermined, in this case, the margin of safety is 26% over the desired 22%, the investment is a qualified candidate for further evaluation. Here are all the positives for Target:

Dividend Yield of > 5%
In the Top 500 Companies in the World
Expected Earnings over the Next Five Years of $45 per Share
Market Capitalization of > $40 billion
Has NOT lost money in over 23 Years.
Long-Term Debt Ratio Mirrors Walmart and is Superior to Home Depot.
Book Value is $32/Share.
Direct Gross Margins are Consistent at 27 to 29% over the Past Ten Years.
Solid and Experienced Management Team

This investment should recover nicely over the next two years, even with a 1% retrenchment in sales per year. Expected earnings per share will still exceed $8 per share per year. Target Corporation is a solid investment at this price and should earn an easy 25% annualized return over the next two years, PLUS dividends. Act on Knowledge.