The Best Stock to Own for this Season

If you live in the US, what is the thing you must do in the first few months of each year? It is annual routine that no one can get rid of and must do to avoid being either fined or even jail time if not done properly. Yes, the tax filing by April 15 each year for all who live here! Or even living abroad for US residents. This reminds me the time over 20 years ago when we were in the Europe. Our neighbor, Catherine, was an elderly lady, very kind and friendly and she gave us a lot of useful local information that helped us a lot when we initially settled down in the city. One topic she frequently talked about was her routine to prepare for the tax filing. It was a year long effort that I initially really couldn’t understand why so complicated. You see, there was no such thing as filing tax over 20 years ago in China and I didn’t have any sense what it meant to file tax back then. And that was the time I first heard such a saying that for everyone, only two things that no one can escape, tax and death. So Catherin was really my first mentor about tax. She was an American and that’s why she religiously started to prepare her tax filing in the first few months every year. It was really not an easy task for her as she did her tax filing all manually on paper. So the first 4 months were her busiest season with top priority! And then she said she had to use her computer to make a category where she had archived her tax-related documents throughout the year since at her age she could easily forget where to find them when needed. What a life as an American, I made a joke with her. “Don’t laugh at me. It is part of everyone’s life if you want to live peacefully. If you ever go to the States to live there, then you will become its slave and milking cow as well!” She calmly replied with smile. “It does not sound like a good place to live,” I was thinking at that time and thought I was lucky that I was not living in the US.

 

Fast forward, I’m now living in the US and I have to follow the same annual routine to file our tax regardless where we go. The complexity of the tax code is nothing less than a PhD thesis, I think. Since it is so complex, it is a daunting tax for most people if without some sort of help, either professionals like accountant or quite popularly the tax filing software or services. So you don’t need to be a PhD to understand that this is a good season for the tax-related business, right?!   And this year, it may turn out to be even the busiest tax season in decades. Why so? Well, 2018 was the first year after a significant reform made to the tax regulation in decades and substantially and numerous changes have been made for this tax season. For most Americans or residents, it is a massive headache and professional help is very much needed. One company is definitely on top of the list for tax service business. That’s H&R Block Inc. (NYSE: HRB). Probably many of you are very familiar with it and even have used it, including myself that I had used for many years in the past. In major shopping malls, you probably will see many HRB cubicles during the tax season. It started its business in 1955 and has over 12000 tax offices not only in the US but also around the globe. It sells software and allows users to file their taxes electronically with the support of accountants and other tax professionals. Virtually by any metrics, HRB is quite cheap at this price around $24, with a P/E just 8.08. Compare that to the industry average of 44.4 times. Its price to cash flow sits at just 6.47, which is nearly a third of the industry average of 18.76. Even more impressive, HRB is a good dividend grower with its current dividend of 4.18%. While HRB is definitely not a growth stock and don’t ever expect it to fly in the sky, it is clearly a seasonal stock price-wise. Logically it will be doing great to generate good revenues during the tax season and that may likely be reflected in the stock price each year around this time.

 

I’m sure no one likes paying tax. But H&R Block may turn out to be the only thing that may let you feel a little bit better about tax!