Foot Locker (FL) — a more risk-oriented idea for the coming year — is an athletic footwear and apparel retailer, notes John Buckingham, value investing expert, money manager and editor of The Prudent Speculator.

The company operates 3,160 stores in 27 countries in North America, Europe, Australia and New Zealand, as well as the popular Eastbay.com and Footlocker websites.

Although FL posted EPS of $1.13 in fiscal Q3 (vs. $1.07 est.), the stock sold off as investors remain concerned about store traffic, margin pressures due to increased operational and digital development costs and direct-to-consumer competition from its largest partners Nike and Adidas.

Given that the bottom line was fine, we thought the latest quarter was solid, but we realize that short-sighted folks were taken aback by the announcement that FL will no longer provide quarterly guidance, but instead offer annual projections.

We like that change as we prefer less focus on quarterly numbers and more attention to long-term initiatives. We continue to believe that the company has several competitive edges, including broad distribution channels, geographic locations, and multiple banners and product categories.

We also think FL will continue to benefit from its strategic cost control and productivity plans, in addition to further penetration of its apparel offerings and solid growth of its digital shopping platforms.

Additionally, we like the strong balance sheet that sports more than $5 of net cash per share and the solid free cash flow generation, both of which support the generous dividend yield of 3.9%. FL trades for 8 times NTM earnings.

(Editor's note: John Buckingham chose IBM as a top pick last year; the stock is up 22%. He now says, "Given our long-term orientation and long-held belief that patience is a critical component of successful investing,  IBM would be a name to which folks should still give strong consideration. This is especially true given its single-digit forward P/E ratio and near-5% dividend yield.")

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