Motley Fool: Dishing about Williams-Sonoma

Williams-Sonoma (NYSE: WSM) has had a solid 2022. Revenue in the first three quarters rose 8.3% year over year, comparing favorably against home furnishings peers that have struggled with a hangover from the pandemic boom.

The high-end home furnishings retailer, which also owns Pottery Barn and West Elm, didn’t disappoint on its bottom line, either, with third-quarter operating income up nearly 3% year over year, to $340 million. Earnings per share in the third quarter popped 13%, too. The company’s stock price doesn’t reflect that growth, though, with shares recently down 27% from their 52-week high – presenting an appealing buying opportunity.

Indeed, Williams-Sonoma’s stock appears quite a bargain at recent levels, with a price-to-earnings (P/E) ratio near 7.5, well below its five-year average of 15. Many investors are likely staying away because of recession-related worries and because management has tempered its near-term growth expectations because of macroeconomic uncertainty.

There’s a lot to like about Williams-Sonoma – with its strong set of brands, growing business-to-business initiative, e-commerce marketplace (which is open to third-party vendors) and commitment to rewarding shareholders via stock buybacks and dividends. Its dividend yield was recently 2.5%. (The Motley Fool has recommended and owns shares of Williams-Sonoma.)

Ask the Fool

Q. Are I bonds decent investments? – H.R., Binghamton, New York

A. They’re worth considering, and they’re particularly attractive now because the interest rates paid by I bonds are tied to inflation.

The rates have two components: a fixed rate that lasts for 30 years and an inflation rate that changes every May 1 and Nov. 1. The fixed rate is currently only 0.40%, but with inflation so high lately, the total interest rate is 6.89%, which applies during the first six months you own the bond and then changes with inflation thereafter.

I bonds can defend your investment against inflation. When inflation is high, they can pay more than many other alternatives, such as certificates of deposit, or CDs.

Q. I heard that when you buy stocks, you have to buy at least 100 shares. True? – G.A., Norfolk, Virginia

A. Nope. You can buy as little as a single share of a stock – and possibly less. Back when many brokerages charged $25 or more per trade, it wouldn’t have been wise to pay $25 to buy, say, a $40 stock. Lots of major brokerages are charging $0 per trade these days, though, so it’s easy to buy small numbers of shares.

Meanwhile, if you’ve been able to direct your brokerage to reinvest your dividends into additional shares of stock (many will do so), you’ll often be receiving fractions of shares. A $5 dividend, for example, will get you 0.33 shares of a $15 stock.

Keep in mind that you may need to be able to account for the shares you buy or receive, knowing your cost basis in order to calculate taxable gains (or losses). If you’re buying and selling in a retirement account, you generally won’t need your cost basis.

My dumbest investment

My worst investing move was selling shares of Amazon.com to free up cash with which to buy other stocks. I had bought my Amazon shares for around $975 apiece and sold them when they were around $1,000 apiece. I have regretted that move ever since. – B.F., online

The Fool responds: That must smart. We don’t know exactly when you bought and sold your shares, but Amazon has clearly been a phenomenal stock for decades. Its shares recently traded near $97 apiece, but that’s after four stock splits: Amazon.com split 20-for-1 in 2022, 2-for-1 and 3-for-1 in 1999, and 2-for-1 in 1998. So if you’d started with just 10 shares in 1997, you’d have ended 1998 with 20 shares, ended 1999 with 120 shares, and ended 2022 with 2,400 shares – worth over $230,000 at recent levels. (Remember that stock splits don’t change the value of your stake in a company – they just increase the number of shares you own while decreasing the stock price proportionately.)

Don’t kick yourself too hard, though – this is a very common kind of mistake. And if you had much of your portfolio in Amazon at the time, it would have been very reasonable to sell some shares and diversify, to avoid having too many eggs in one basket.