Scalper1 News
The rally that began in February has disappointed growth stock investors. Their best names have done little. But one group that stands out is the discount retailers. The industry group is ranked No. 6, rising from No. 43 three months ago. It’s up 17.4% year to date as of Tuesday’s IBD. That’s in contrast to a 2.2% decline for the Nasdaq and a 2.1% gain for the S&P 500. The group has only five companies, all within 6% of 52-week highs. Their strength might be evidence of a desire by money managers to invest in consumer-oriented firms that are still growing amid a soft economy and declining earnings in other sectors. The star of the group is new issue Ollie’s Bargain Outlet ( OLLI ). It broke out of a cup-with-handle base, which was also an IPO base, with a 22.63 buy point March 18. After sputtering for a couple of weeks, it rose sharply, slicing through the profit-taking zone between 20% and 25%. It’s now consolidating in that zone. The company operates what it describes as 207 “semi-lovely” stores, mostly in Eastern states, that sell closeouts, excess inventory, bankruptcies and last year’s colors, patterns and packaging. If your area has had a flood, fire or earthquake, you might find undamaged goods bought from insurance companies. Prices can be up to 70% off. The company wants to grow to 950 stores. Another strong stock in the rally is Five Below ( FIVE ), which caters to teens and tweens with cellphone accessories, toys, casual apparel, sports gear, candy and seasonal items, all costing under $5. It’s been a volatile stock, but the fundamentals have been solid. Last week, Credit Suisse issued a report calling Five Below “one of the most attractive growth stories in retail.” It operates 437 stores but plans to grow to four or five times that many. The five-year annualized EPS growth rate is 45%, although earnings have slowed some in recent quarters. Analysts expect 24% growth this year and 22% in 2017. Dollar General ( DG ) gapped out of a cup-with-handle base with a 76.85 buy point after reporting an 11% increase in fiscal Q4 earnings on March 10. After encouraging investors with a run-up after that, it has pulled back and found support at its 50-day moving average. The pullback came in generally light volume, and the day it found support, April 22, volume was higher, but the stock finished more than 40% off the low of the day. That constitutes bullish action. Two other stocks in the group, Big Lots ( BIG ) and Dollar Tree ( DLTR ), also deserve a look. Big Lots broke out of cup-with-handle base with a 46.23 buy point on April 13 in below-average trade, but volume picked up sharply as the stock rallied nearly 2% to 47.68 in heavy trading. The stock remains in the 5% buy zone. It reported a 14% earnings increase in the last report, slightly above estimates. Dollar Tree has been moving in a narrow trading range for most of this year. Earnings per share have declined vs. year-earlier levels for three straight quarters but are expected to rise 14% in the next report to 81 cents. Scalper1 News
Scalper1 News