Sunday, November 26, 2006
Dirt Cheap Stock Picking: Chapter 2
I have been following specialty retailer over the past year and I have to admit that the entire sector had surprised me and pretty much everyone. Stocks like COH, MW, URBN, and DBRN have moved up nicely over the past couple months. In fact, URBN which I named in my chapter 1 list now is up nicely from $18 to $23 in a short month! I don't claim to know all that there's to be known about retailer and I am not by any stretch of imagination your hip-hop, fashion guru but some common sense makes me believe that there are still some good ones left out there. CHS and CBK have come to my attention recently. Both of which I only venture to put 18+ month price forecasts. CHS is about to post earnings and the price pattern suggests that no negative surprise is expected. I can see a 18+ month price of $55. In CBK's case, I can see some serious downturn in near future (somewhere in neighborhood of $15) but stock can see highs of $30 in longer term. Again, I am on the record, so we will see what's gonna happen!
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I do not think URBN is the right choice for those who are bullish on hip-hop fashion and want to make a cheap bet on the continued success of said culture- that would be FUBU, if it ever went public. URBN focuses on upper middle class suburban white teenagers who short term trends, and who have no problem spending (having parents who will spend) $165 on it. It also is “hot” if you are into neo-retro stuff which mainly looks good on kids. I think URBN is going to move sideways for the forseeable future. However despite these “fundamentals”, a casual perusal of a 20 day EMA, RSI, and MACD indicates a golden x weak sell signal, nothing, and nothing, respectively, as of 4:29 PM today for URBN. JAN, $35 puts (URGMG.X) are way up today, maybe due to instore sales news. but my favorite retailer is CHS (Chico's), where i think janet reno types shop. its governance sucks, designers suck, and technicals are horrid. a good short pairs trade would be CHS and TLB. a decent long pairs trade might be URBN and BEBE as summer gets closer, since trashier clothes will be more acceptable. BEBE is cheaper if you want to bet on the same retail strategy as URBN and its technicals are nearly identical. Its inventory is, better too.
ReplyDeleteanother interesting combination is DBRN and COH for the middle class lower-to mid-level white collar functionary such as myself. Buy cheap, low quality but tolerable work clothes at DBRN and combine them with COH accessories. You can cover up a black turtleneck so that status conscious coworkers or friends can not identify the brand, but everyone recognizes the C. (Dress barn's inventory is sometimes hideous but it is cheap.)
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