Value Line Low Total Return Screen (5/3/2013)

Companies of Interest

Pittsburgh-based Rue 21 (RUE) is among some of the more interesting shopping opportunities this week. It’s joined by legacy community favorite Bed Bath & Beyond (BBBY) as this retailer seems to have returned to broader appeal after something of a shakeout hiatus. We’ll be taking a closer look at BBBY this week.

There weren’t a lot of shoes (or purses) dropping in this weekly update. Most of the adjustments to the long-term low price forecast amounted to nudges. Several of the companies with the highest return forecasts were trimmed — but not enough (less than 20% change) to be mentioned in the Materially Stronger/Weaker roll call.

The “Big Boxes” like Wal-Mart (WMT), Costco Wholesale (COST) and Target (TGT) all got modest boosts for their long-term low price forecast. No one is quite sure what to expect from the management change at J.C. Penney (JCP) … a flood of traditional discount coupons notwithstanding … but the low price forecast was dropped from $20 to $15.

We’re not sure what to think of the massive forecast adjustment (from $20 to $35) in Best Buy (BBY) but it’s probably in line with recent price action … and we’ll adopt a show-me position, perhaps a little skeptical as to whether the fundamentals will really improve all that much, or that suddenly. Value Line also took their foot off the brakes at GNC Holdings (GNC).

Coldwater Creek (CWTR) went from $2 to $3 (+50%) for the 3-5 year price forecast. Caveat emptor.

Materially Stronger: Williams-Sonoma (WSM), Hot Topic (HOTT), American Eagle (AEO), TJX Companies (TJX), Hertz Global (HTZ), Gap (GPS), OReilly Automotive (ORLY), Best Buy (BBY), Haverty Furniture (HVT), GNC Holdings (GNC), Cabela’s (CAB), Black Hills Corp (BKH), Coldwater Creek (CWTR)

Materially Weaker: Hibbett Sporting Goods (HIBB), RadioShack (RSH), Citi Trends (CTRN)

Market Barometers

The Value Line low total return (VLLTR) forecast is 6.8% this week, compared to 6.8% last week.

  • The long-term range for the VLLTR varies from low single digits to approximately 20%. The current value of 6.8% is at the low end of the range — suggesting that an emphasis on highest-quality stocks is in order.
  • The relative strength index for the Wilshire 5000 is overbought, but this can remain this way (for markets, sectors and individual stocks) for an extended period. We’re more vigilant and concerned about RSI “breaks” like the one on display here back at Halloween 2007. The caution flag is up — but no sign of an RSI break for the Wilshire 5000 right now.
  • We’re exploring the momentum indicator suggested by Ned Davis, specifically Rate-of-Change … or ROC in this analysis. It’s “pure price momentum” and in our deployment — applied across the months and years, perhaps more appropriately tagged “investing momentum.” Any positive value (shaded in green on the graphic) is indicative of price momentum. Note the extended period of RSI greater than 70 (overbought) back in 2006-2007. Like we said, markets, sectors and stocks can stay overbought for quite some time and in this case, price momentum is still intact. Shop carefully. Emphasize high quality and financial strength.

Weekender Screen: FOSL COH RUE

Tomorrow’s Value Line edition update is basically the “Shopping Edition.” It includes a bunch of retailers, apparel and specialty retail companies with a few others. But it’s clearly deluged with those consumer discretionary companies that torment us.

To kick things off, for those in rainy day refuge or looking for some stocks to study in advance of the update, here’s some of the stocks we’ll most likely be chewing on over the next few days.

All of these stocks have relatively high return forecasts, either good or excellent quality rankings, relative price strength and momentum and in most cases, symptoms of positive (upward) price pressure.

Fossil (FOSL) and Nick Stratigos’ Round Table Selection of Rue 21 (RUE) head this list and qualify on all counts. Our 8th most widely-followed stock, Coach (COH) qualifies with the exception that COH still seems to languishing in bearish sentiment — although last week’s positive news probably places that weaker characteristic in jeopardy.

Weekender screen 20130428

Value Line Low Total Return Screen (2/1/2013)

Based on a combination of fundamental and technical analysis, Rue21 (RUE) appears to be among the more attractive candidates for further study this week.

We’ll be taking a closer look at Aeropostale (ARO), Coach (COH), Deckers Outdoor (DECK) and Kohl’s (KSS) as they’re all current tracking portfolio selections or ranked fairly highly among our most widely-followed stocks by our subscribers.

Materially Stronger: Iconix (ICON), Foot Locker (FL), Christopher & Banks (CBK)

Materially Weaker: Aeropostale (ARO), Coach (COH), Bebe Stores (BEBE), Kohl’s (KSS), J.C. Penney (JCP), Big Lots (BIG), Crox (CROX), Deckers Outdoor (DECK)

Rue21 (RUE)

rue21 (RUE) was the 4th company in our annual stock selection countdown during late December 2012. RUE is a specialty retailer of private label apparel and accessories. The company offers an assortment of fashion merchandise at value prices, primarily catering to the teenage demographic. Products offered include graphic t-shirts, denim, dresses, belts, jewelry, handbags, footwear and intimate apparel.

The company was selected by Pittsburgh’s own Nick Stratigos during the February 2012 edition of our monthly Round Table. Nick is the reigning individual stock picking champion for our annual Groundhog Challenge and RUE has delivered a +3.4% relative return (vs. Wilshire 5000) since the time of selection.

With a sales growth forecast of 13%, net margin estimated at 4.9% and a projected average P/E of 18x, the return forecast is approximately 16%. RUE has a quality rating of 70.6 (Excellent). As shown here, the Value Line low total return forecast is 14%.

rue21 (RUE)

 

rue21 (RUE) is the 4th company in our annual stock selection countdown. RUE is a specialty retailer of private label apparel and accessories. The company offers an assortment of fashion merchandise at value prices, primarily catering to the teenage demographic. Products offered include graphic t-shirts, denim, dresses, belts, jewelry, handbags, footwear and intimate apparel.

The company was selected by Pittsburgh’s own Nick Stratigos during the February 2012 edition of our monthly Round Table. Nick is the reigning individual stock picking champion for our annual Groundhog Challenge and RUE has delivered a +3.3% relative return (vs. Wilshire 5000) since the time of selection.

With a sales growth forecast of 13%, net margin estimated at 4.7% and a projected average P/E of 18x, the return forecast is approximately 17%. RUE has a quality rating of 70.2 (Excellent).

We’d like you to invite us to come see you.

 

Christmas Countdown (2013)

It’s hard to believe that 2012 is winding down. And with the Wilshire 5000 (VTI) up approximately 15% YTD, it’s time to take a look back at the selections we made during the 2012 Christmas Countdown. Bottom line: The nine selections have a positive relative return of +4.2% and an out performance accuracy of 67%. Santa, we’ll take that.

With a positive relative return of +2.2% for the 2011 selections (and an out performance accuracy of 58.3%) we’ll knock on wood — celebrate the positive outcomes — and start the hunt for stocking stuffers for this year’s countdown.

Christmas Countdown (2013)

Dashboard: 2013 Countdown Stocks