Two Hot Stalled Retailers to Buy
The market has found some legs and although I remain wary about this fed-induced state of happiness, there are two retail stocks that I believe have taken a well-deserved pause after a recent run.
Crocs (CROX) and Under Armour (UA) are stocks that jumped 36% and 34% respectively in July. Since then, both stocks have stalled, while the market has moved down, and then back up. In fact, the market is virtually unchanged since July 3rd.
Both these companies have demonstrated extreme growth as I outlined in my post recommending both these stocks back on July 31st. Under Armour, considered by many to be the next Nike, grew revenues by almost 51%, and net income by 135% in its most recent quarter. Crocs, in its most recent quarter, beat all expectations with net income up 205% and revenues up 162%. The shoe company has plans for aggressive expansion across the globe, with Europe growing at 920% last quarter.
Crocs trades at 22 times forward earnings, which is cheap considering their growth rate. On the other hand, Under Armour, trades close to 50 times earnings, but their earnings are expected to accelerate in the forthcoming quarters due to geo-expansion and new lines of apparel, including women’s apparel.
The 20-day averages of both these stocks have finally caught up with them, and the quiet sideways action of the last month in both these names are a cause for action – Buy!
– Faisal Laljee
Full Disclosure: I own CROX and UA but my position can change anytime without notice.
F.L. track record is below average.
Good call, Pal.
Faisal – great call and what timing! Is it too late now or can I still buy?
Thanks
RT
RT – UA is definitely still a buy although I recommend buying a third of your position here and a third if the stock drops to $62 and $60 (if that happens).
CROX is also a buy, considering it broke out yesterday, but there are two things to consider. First that the stock broke out yesterday but we need a follow through this week to confirm the start of a new run. Second, the stock is already up 10% from my recommended buy point, so if it does not follow through, there is a chance it might drop back to the upper 50’s. Buy some now and then build your position if the stock drops below 60.