Thursday, December 29, 2005

Stocks and More

So, it looks like Abercrombie and Fitch (ANF) ran away from me. I'm not going to chase. I did spend some time recently researching other retailers, and from a valuation point of view, it looks like American Eagle Outfitters (AEOS) is undervalued. Yes, there were some recent disappointments, but the stock is trading at low multiples. Also, using the metrics described by Greenblatt in his books, AEOS has strong pre-tax earnings yield as well as excellent return on its capital.

Compare AEOS with a P/E of 12.5 against ANF with a P/E of 25. AEOS operating profit margin over 20% and ANF's at around 18%. AEOS is currently distributing a dividend yielding 1.4% compard to ANF's 1.1%. If we're to assume that analyst earnings projections are accurate (they're often not), AEOS forward P/E is under 11, ANF's is looking to be about 17. So, the growth estimates for ANF are clearly stronger, but if the retail sector moves as a whole, then AEOS should outperform many of its peers in my estimation.

So, I've put in an order to establish a position in AEOS just around the closing market price. Hopefully, the order will be filled. I'll be on the plane during market hours, so I won't know if I am an owner of AEOS or not until I get back.

Also, don't you hate getting out of a losing trading position only to see it rocket back up for substantial profits shortly after? Ugh. Remember the 10% or so loss I took on Under Armour (UARM)? Well, had I still owned it, I would have rung up a more than a 50% gain instead. You win some, and you lose some.

Looks like I'll be beating the S&P this year. With only one more trading day to go, I'm up on it by enough that unless something drastic happens, I should hold my lead. Final year results will be posted up later. A big China post will come soon after my trip as well.

Ok, time to stop rambling, I'm just a bit bored... I have another half hour or so before we catch a cab to the airport.

One final remark... Shanghai people are ridiculously rude and aggressive. Makes New Yorkers seem like the nicest people ever. And, it makes us Californians seem like total wimps.


Anonymous said...

I read an article about how China is full of really rude people because they slaughtered all of the more proper people during their cultural revolution.

And Californians aren't rude like New Yorkers, there's just a pretty high douchebaggery quotient there. New York has the monopoly on assholes. Are these Shanghainese douchebags or assholes?

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