Is The Retail Sector Just A Devil With A Red Dress On?
Let me start
today’s column by saying two words……….CHA CHING!
We took profits on our brokerage
shorts which gained nearly 10% as well as booking
some nice gains in the tech sector from our long positions initiated
this morning, even after
(
AMCC |
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PowerRating)
(Applied Micro Circuits) cut the cheese pre-market
with a confession regarding major order cancellations.
To round it out, we saw both
(
RJR |
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and
(
MO |
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Double play completed.
We are now beginning to see the
aftermarket CNBC specials on the retailing and
apparel groups as they are now the chic new sectors. Prior to this, we
saw pre-market hype and
aftermarket television special segments on the drug stocks
(which tanked soon thereafter) and the brokers (which topped immediately
after we went short last week). With Consumer Confidence hovering around
historical lows and spending slowing considerably, it is clear
that the consumer is a bit more selective of how he/she spends their
money. Is there a sound
economic reason retail and apparel stocks are being bid
up with such fervor? Or are we again witnessing more speculation of the
mythical second-half
recovery’? There was a question posed to a retail sector analyst
on CNBC aftermarket as to whether profits should be taken after the
recent gains in the
sector. (She essentially avoided a direct response.) You
be the judge.
Take a look at these charts below.
If they were technology stocks, we would
be hearing about how
overvalued they are.
Daily chart of
(
MAY |
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PowerRating) (May
Department Stores):
As seen above MAY has doubled from its
October 2000 lows.
Federated Dept. Stores has also
doubled from last summer.
Women’s apparel company Talbots Inc.
has recorded a gain of nearly 230% in the
past 12 months. I currently have a call into management regarding a
rumor that they will soon
be producing fiber-optics components.
How many tiny t-shirts and lycra
clothing does the world really need? You be the
judge.
Dress Barn. I didn’t believe it when I
saw it in the motion picture “Twister,” but I guess pigs really do fly
in tornados.
Up over 500% in the past eight months,
Gymboree Corp. must be the 800 lb. gorilla of
the children’s clothing industry. By the way, the company loses money
much like many of the
internet stocks did. Wall Street makes fun of the investor
who bought internet stocks that lost money. Why is this different?
Would someone check my
pulse?
Charlotte Russe Holdings Inc., or
(
CHIC |
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PowerRating),
is a “mall-based specialty retailer of
value-priced apparel and accessories targeting young women between the age
of 15-35.” With a PE
ratio of 30+ and trading at roughly 8x book value, CHIC has
certainly transcended traditional valuations in the retail apparel sector.
I present these charts to you so you
can do your own technical analysis on them. Use your tools and your methods to
determine if they present good opportunities.
More times than not, many are clueless (no pun intended) as to
when a change of trend is beginning to take shape. Only through technical
analysis can these
opportunities be determined.
As I write this, Cisco Systems just
carpet bombed the tech sector with an ugly
earnings miss. I don’t have any information on the conference call at
this time.
Be careful out there.
Goran