Barnes & Noble Inc. $43 - New York symbol BKS

BARNES & NOBLE INC. $43 (New York symbol BKS; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 65.6 million; Market cap: $2.8 billion; WSSF Rating: Average) is the largest bookseller in the United States, with 681 full-size stores and 118 mall-based stores. It has no foreign operations. Due to a lack of best-selling titles and growing competition from online booksellers, same-store sales during the busy Christmas shopping season fell 0.1%. Sales should improve over the next few months due to this summer’s release of the final Harry Potter novel. TV-host Oprah Winfrey is once again recommending books on her show, which should also spur sales. Despite the lackluster sales and uncertainty over the possible backdating of options, Barnes & Noble’s stock has moved up on takeover rumors. Insiders control roughly 25% of the shares, which could scare off some bidders. Still, the company’s steady cash flow makes it an appealing target. The stock trades at 19.5 times the $2.20 a share it probably earned in its latest fiscal year. The $0.60 dividend yields 1.4%. Barnes & Noble is a buy.

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