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Abercrombie Just Doesn't Fit


A solid future is a stretch of the imagination.

Minus the rain and the massive pile of leaves I had to deal with in my backyard, it was a terrific weekend. But as usual, it seemed just a little too short.

Asian stocks rose overnight. The Hang Seng and the Nikkei were up 1.73% and 0.21%, respectively. European stocks were in positive territory early this morning, too. And here in the US we're currently trading higher.

Here's what I'm focused on during this fine Monday morning:

Abercrombie & Fitch (ANF):
Excluding items, this company put up $0.30 per share in the third quarter. That's not bad as the estimate was $0.20. It managed to beat on the top line, too.

My take:

1. It was a solid beat so it's understandable that a few eyebrows will be raised. But I fail to understand the consistent loving the investment community gives the company.

2. Oh wait, I get it, it was the company's margins. No wait, that can't be it. Its gross profit as a percent of sales came in at 63.6%, which was down from last year. Oh, it must be its rapidly accelerating sales! No wait, sales were down from the comparable period last year. Oh, clearly its comp store results are what's raising eyebrows. Whoops, that can't be it because comps were off a hefty 22%. Well it's cheap then, right? Negative. It trades at more than 44 times this year's estimate, which from what I can tell isn't a bargain.

3. Long story short, I'll take a pass. I'd rather slip my cash into a gumball machine.

For my last take on Abercrombie, see AIG on the Path to Nowhere.

Palm (PALM):
Who hearts Palm?

The chatter on Friday is that Nokia (NOK) might dial these guys up.

My take on Palm:

1. Look, I dig the Pre, and I'm not doubting that a few years down the line the company could be dishing out some respectable earnings. I'll also concede that some might find the recent dip in share price tempting. But the skinny is that I'm just not going to be swayed.

The fact is this company isn't expected to put up the most stellar numbers this year or next. The competition remains stiff and there simply isn't enough for me to grab onto here to make me want to plug my ears, grab my nose, and dive in headlong at this particular point in time.

3. In a nutshell, the phone may be ringing, but I'm just not going to pick up.

For my last take on Palm, see Why Palm's First-Quarter Beat Isn't Enough.
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No positions in stocks mentioned.

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