Company name AMCON Distributing Co.
Stock ticker DIT
Live stock price [stckqut]DIT[/stckqut]
P/E compared to competitors Good

MANAGEMENT EXECUTION

Employee productivity Good
Sales growth Poor
EPS growth Poor
P/E growth Good
EBIT growth Poor

ANALYSIS

Confident Investor Rating Fair
Target stock price (TWCA growth scenario) $81.29
Target stock price (averages with growth) $64.86
Target stock price (averages with no growth) $43.08
Target stock price (manual assumptions) $81.45

The following company description is from Google Finance: http://www.google.com/finance?q=dit

AMCON Distributing Company (AMCON) operates in two segments: wholesale distribution segment (Wholesale Segment) and retail health food segment (Retail Segment). The Company’s Wholesale Segment distributes consumer products in the Central, Rocky Mountain, and Southern regions of the United States. Its retail health food segment (Retail Segment) operates 14 health food retail stores located throughout the Midwest and Florida. During the fiscal year ended September 30, 2012 (fiscal 2012), sales of cigarettes represented 73% of the Company’s consolidated revenue. During fiscal 2012, sales of candy, beverages, food service, groceries, health food products, paper products, health and beauty care products, and tobacco products represented approximately 27% of consolidated revenue.

 

Confident Investor comments: At this time, I think that a Confident Investor can cautiously invest in AMCON Distributing Co. as long as the price is correct. Most of the fundamentals of this company are good but there are some concerns.

If you would like to understand how to evaluate companies like I do on this site, please read my book, The Confident Investor.

For owners of my book, “The Confident Investor” I offer the following analysis (you must be logged in to this site as a book owner in order to see the following analysis). If you have registered and cannot see the balance of this article, make sure you are logged in and refresh your browser.
[s2If current_user_can(s2member_level1)]
In order to assist you in using the techniques of this book, the values that I used when calculating the Manual pricing above were:

Stock price at the time of the calculation: $80.69

Growth: 0.1

Current EPS (TTM): $9.05

P/E: 9

Future EPS Calc: $14.57

Future Stock Price Calc: $131.17

Target stock price: $81.45

I hope that this makes you a better investor. [/s2If]

Strategy

successful investment strategy

An example of this successful investment strategy will help you better understand. You buy 100 shares of a company at $40. It costs $10 in stock broker commission, so you spent $4010. Over the course of a few months, the stock rises to $44. Your investment is now worth $4400. The indicators make you believe that this company will have a short term pullback in its stock price, so you want to sit back while the market moves. However, you still want your money to work for you at this great company. You sell your initial investment only ($4,010) plus the selling commission of $10. $4020 divided by $44 means 92 shares (or a net of $4,048). Your principle is safe (plus the $28) and you have 8 shares in this great company. These 8 shares were bought with Other People’s Money.

Eventually, the indicators show that you should buy in again. Perhaps this new level is $43. You reinvest your $4,048 minus $10 commission and buy 93 shares with $39 left over. You now own 101 shares for your original $4,000 investment for an average price of $39.60. You have bought these shares at a discount of $4.40 per share. In addition, you have $39 in your money-market account at the broker making money at market rate interest.

Using this technique as part of a successful investment strategy on a great company, slowly over time, your investment will grow. Your downside risk will be minimized (although with all investing, your risk is never minimized to zero).

Typically, I do not use technical trading tools to sell the shares that I buy on Other People’s Money. I only sell those shares when the fundamentals of the company start to turn from Fair to Poor or when the stock has appreciated to the point that I see little upside. Otherwise, these are lifetime investments because I have not spent any money to acquire them.

I cannot leave this subject a successful investment strategy without a reminder for you to be cautious with your earnings. Try to avoid greed and hope for a small return on your money. When you are concerned that the market has moved against you and the indicators all look like they are going to give you a sell signal soon, go ahead and lock in your profit. There is no shame in being cautious and profitable as you work your successful investment strategy.

Image courtesy of Stuart Miles at FreeDigitalPhotos.net