Monday, February 19, 2007

Retail - I Hate Retail

But sometimes I find a gem in the muck and when I do I want to share it.

The back story is simple - I was going through my filters looking for breakouts and I ran across CHS. There is no way that I would invest in CHS but it was a legitimate breakout so I decided to do some investigation anyway. While I was going through the competitor comparison using my not so complicated method of dividing their trailing 12 month revenues by their employee numbers I surfaced the fact that Talbots (TLB) is not only superior to CHS but significantly superior. And Talbots also broke out just the other day. And on the weekly charts TLB shows a very crisp breakout formation.

TLB also beats ANN, DDS, and FD in the competition - consequently I think TLB is a pretty good store.

Some other facts - while CHS insiders are selling everything they own - TLB insiders are mostly buying. Institutional ownership is only 45% but there they are mostly buying also. It would be very bad to buy a stock that everyone else is selling - that's how you become a bag holder.

TLB reports earnings on March 7th and given the current breakout it is possible that they will be rising into earnings and that is a good thing. Of course if you do buy them and then choose to play earnings roulette that is your choice - trust me when I say I won't be on the felt with you.

As far as I know they are not planning a secondary offering - but these things come from nowhere so that's just one of the risks. And until the Congress makes it illegal to do so we're stuck with it - and what are the odds of that? Right.

I have pretty much talked myself into taking a small piece of this action tomorrow morning. If I do it will be because of the breakout pattern, the rising into earnings, and the fact that they are number one among their competitors (using Marlyn's crazy methods - if you don't trust yourself who can you trust?).

This is not an invitation to speculate in the stock market - the stock market is a cold, scary place - and you will always do better just buying an index fund and holding it forever.


Bullish Jim said...

I like that chart.

TLB is a good retailer, to boot. And their shopper, affluent suburbanites, are really the only ones I care about in retail anymore.


Retail stocks come and they go.