An appreciation of Borders

I went to the Borders liquidation sale.  It was busy, but not as busy as I expected.  I will miss the chain. Five things made the chain better than Barnes & Noble: they had better locations, the store look was consistent and high quality, their book selection was better, they had good author signings, and they had good stores in Detroit.  Believe me, Detroit is a pretty bleak place.  Being able to walk a quarter mile in the snow from my hotel in Novi in the freezing cold to a warm Borders with an excellent history selection made weeks spent there slightly more tolerable without having to drink heavily.  Borders had really good locations– K St. and at Pentagon City, in DC, Union Square in San Francisco.  The store at Preston and Royal in Dallas was for over 10 years the biggest bookstore in Texas.  Borders had well-labeled sections inside the brightly-lit stores, distinctive lettering, and the carpet was lighter — whereas Barnes & Noble always has dark green and blue carpet, Borders carpets were white and black.  The bookshelves were an inviting natural wood color.  Perhaps most importantly, Borders stores had good selections tailored to the local market: History, MATLAB and mechanical engineering books in Novi; digital design books in San Jose; Politics and American History in DC.  Their science sections were far superior to Barnes & Noble and just about any other local bookstore except perhaps Book People in Austin.

Unfortunately, Borders also had truly terrible management.  What idiot outsourced their online sales to Amazon until 2008?  Why, when every genre except country music had year on year CD sales declines of more than 20%,  would you not phase out the music part of the store?  Why no response to the Kindle until years later?  How could a board tolerate a CEO letting company loose money every year for 3 years?

What really struck me as odd was at the liquidation sale, people sat on the floor and read books?  Why not just buy them?  Maybe they wanted to spend time browsing at Borders one last time?

6-Month check on stocks

Similar to how Barron’s gave themselves a report card on their 1st half of 2011 stock picks, I tabulated the return of the stocks that I am invested in from Jan 3rd to Jun 30th of this year. 

Stock     Price change

  • XOM     +10.36%
  • PFE      +18.87%
  • WTR        -1.79%
  • JNJ         +7.78%
  • ADP      +13.78%
  • LLTC       -3.45%
  • INTC       +8.04%

Assuming equal weight in investments this gives an overall return of 7.7%, exclusive of dividend reinvestment.  The S&P 500 returned 3.83% for the first half.  So I exceeded the benchmark by 200%.  I continue to believe that the discounted earnings and dividend flow model* gives an investor a powerful tool to value stocks, which can be used to create a portfolio that can meet or exceed the return of an index over the long term. 

*someone (N.Y.) pointed out that in my forecasting, I am not actually estimating cash flows, but rather flows of earnings and dividends, and discounting those items.