Indigo Books & Music $15 - Toronto symbol IDG

INDIGO BOOKS & MUSIC INC. $15 (Toronto symbol IDG; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 24.6 million; Market cap: $369.0 million; SI Rating: Speculative) is the largest book retailer in Canada. It has 88 superstores under the Chapters, Indigo and the World’s Biggest Bookstore banners, and 158 small format stores, under the Coles, Indigo, SmithBooks and The Book Company names. Indigo’s sales in its second fiscal quarter ended September 29, 2007 rose 14.8%, to $209.2 million from $182.3 million a year earlier, due to strong demand for the final book in the Harry Potter series. That helped Indigo earn $0.13 a share in the quarter, compared with a loss of $0.04. The last three months of the year includes Christmas, and it’s the busiest period for the company. Indigo typically loses money in the other three quarters. Indigo plans to open eight new superstores over the next 18 months. Following a successful trial, Indigo also plans to add more toys to its superstores. These toys focus on the “edutainment” market — toys that offer both education and entertainment. The stock trades at just 8.9 times the $1.69 a share it should earn in fiscal 2008, and 42% of its sales of $36 a share. Indigo is a buy.

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Blue chip stocks are big, well-established, dividend-paying corporations with strong business prospects. These are companies that also have sound management that should be able to make the right moves to keep competing successfully in a changing marketplace.

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Dividend stocks make cash payouts that serve as a way for companies to share the wealth they’ve accumulated. These payouts are drawn from earnings and cash flow and paid to the shareholders of the company. Typically, these dividends are paid quarterly, although they may be paid annually or even monthly as well.

Value Stocks

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One of the sweetest and most profitable pleasures of successful investing is to buy high-quality “value stocks” (or stocks that are reasonably priced, if not cheap, in relation to its sales, earnings or assets), then hold on to them as mainstream investors recognize the value and push up the share price.

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