In an attempt to diversify, I decided that I wanted to find a company that is in the retail sector. The first thing that I did before I began my search was to set a few things that I wanted in a company. I wanted a regional retailer that still presented the prospect of expansion. This eliminated companies that are already national chains, as I want the opportunity of growing into new regions. The next thing that I wanted was a company that was already established in its market place and has stable financials. This part is very important because while I do want growth opportunity I also want a company that has a successful business model.

After searching around the company that I found to fit the above two criteria is Conn’s Inc. They are a retailer specializing in the sale of home appliances and consumer electronics in Texas and Louisiana. Conn’s currently operates 62 retail locations in Texas and Louisiana and plans to add 6 to 8 more stores over the 2008 fiscal year. According to COO William Nylin this will represent a increase of floor space by approximately 10-13%. It must also be noted that Conn’s is currently rearranging existing floor space in order to dedicate more space to the sale of furniture, because furniture has the highest margins of any of the products that Conns sells.

The next area that I want to talk about with regard to Conn’s is the two portfolios that are being held as part of the credit company. This portion of Conn’s business is interesting and must be addressed due to the effect of Hurricanes Katrina and Rita, which caused a large amount of delinquencies in the past two years. This, coupled with a relatively inexperienced support staff, left much room for improvement, but as Conn’s moves forward the portfolio is seeing delinquency levels that are near historic norms and the staffing has gained experience.

Taking into account growth rates of 13% over the next five years and using a discount factor of 10%, I currently believe CONN to be worth around $26 a share. This means the stock is currently trading within a few percentage points of what many believe its intrinsic value to be, but I believe Conn’s has many areas in which they have the opportunity to exceed analyst’s estimates.

Overall, I think that Conns represents an interesting company that has the ability to grow by opening new stores while driving same-store profits through better product mix. Also, Conn’s is a company that has this growth potential, but also is healthy and making money with its current setup. Given managements’ plan to add 6-8 stores over the 2008 fiscal year, I think we will see Conn’s business and stock to continue to improve.