Anyone who reads this blog knows my affinity for retail stocks, particularly apparel retailers. Simple businesses with measurable demand yet so complex and diverse in execution and strategy. More importantly, retail stocks can be quite volatile as investors fall in and out of love with the stocks almost as quickly as consumers fall in and out of love with various fashion trends. Just a few months ago, I wrote about how investors have unfairly punished retail stocks over the last year. In the last few weeks, we’ve seen just how quickly they’re willing to pile right back in. In fact, on a technical basis, many are showing signs of strong reversals.
At the turn of the year, I was eyeing The Buckle (BKE) with both excitement and trepidation. Having seen the stock bounce strongly off lows in the teens, a combination of fear and greed kept me on the sidelines hoping that the stock might sell off back into the teens. In a testament to why you shouldn’t try to time the market or try to be overly fine in your attempt to secure a few percentage points in your entry point, The Buckle continued to perform in the face of the current recession and never fell below $20 a share again. Instead, it’s appreciated around 50% since the January 1, leaving scaredy-cat investors like me in the dust. But, The Buckle isn’t the only quality retailer out there and, even with the recent market rally, there are still quite a few interesting opportunities out there.
J. Crew Group
J. Crew is a former portfolio holding that I’ve written about a lot over the last few years. Long story short, I’m a big fan of what Mickey Drexler (the engineer of the Gap growth story in the 90s) has done with the Company. He’s transformed the brand from a too-preppy, questionable quality teen retailer to a legitimate fashion brand with some tremendously unique retail locations. Further, he’s quietly begun scaling a teen brand, Madewell, that I think has a chance to really drive growth in the future. As one of the few true growth stories left in apparel retailers, I think J. Crew could be a real winner once consumer spending perks up again. With all the great press from Michelle Obama lately, that could be sooner rather than later.
On a technical basis, the stock has begun the first phase of a healthy reversal with a strong breakout over its 50-day moving average.
