Wednesday, August 30, 2006

Quick Update and a Thought

Markets are once again off the races... a bearish crude oil inventory report was released today, which should hopefully keep oil prices lower.

Altria Group (MO) increased its dividend by 7.5% to an annual $3.44. At current prices of around $84, this represents a solid 4.1% yield. I continue to be a big believer that continual dividend increases (sustained by its earnings) is an indicator of earnings quality. Go MO!

Now, let's talk briefly about a stock that's done very well since its purchase... American Eagle Outfitters (AEOS). As you recall, we picked it up just below $23 a share back in December of last year. Back then it looked inexpensive, especially compared to other teen retailers. Although the stock's run-up has been a very good thing, it is now looking a lot less attractive valuation-wise. This has led me to its peer, Abercrombie and Fitch (ANF).

It might be prudent to swap out part of the AEOS position for ANF. So, if you're still bullish over the longer-term on the teen retail sector, you might want to consider this. I know that some of you bought AEOS on the initial recommendation. To those, I suggest at least considering a partial swap into ANF. I will probably be making this partial swap myself some time this week.

Right now, AEOS is valued at roughly the same amount as ANF ($5.50B vs $5.55B, using current stock prices, respectively). I believe it is tough to justifiy this. Anyway, that's my thought for the day.

1 comment:

Eli said...

Thanks for dropping by my blog earlier. I like you blog after looking around a bit. I've added you to my blogroll and book marked your site and wouldn't mind if you did the same :)

As for the Yahoo sidebar, just FYI you can add more than 10 stocks to it (and change them as well) just by editing your template (you can see where the stock symbols are, and add, delete & change them there)