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Why The Children's Place Is the Place to Be

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It's tough to find fault with a company that runs so well in a difficult operating environment filled with competition.

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Asian stocks advanced overnight but were largely range-bound. The Hang Seng and the Nikkei rose 0.09% and 0.96%, respectively. European stocks, however, were mixed in early trading. And here in the US, we're currently trading lower.

Here's what I'm focused on (besides the rapidly approaching weekend):

The Children's Place (PLCE):
The clothing retailer was out with its fourth-quarter numbers yesterday.

In case you missed it, excluding items the chain put up a $1.03 a share from continuing ops which was in line with estimates. It also painted a solid first-quarter and full-year outlook.

Some other thoughts:

1. It's hard to find fault here because in a difficult operating environment filled with intense competition, its ability to block and tackle, run its business, and perform well stands out.

2. Despite the run the stock has had already, it still trades at a reasonable 14.3 times this year's estimate, and I think there's further upside potential here despite what the naysayers may say. That said, I wouldn't chase the stock too high in the near-term as I suspect some of the recent gains will eventually be consolidated.

Hot Topic (HOTT):
Along with American Idol, the California-based retailer and its fourth-quarter results are likely to be a topic of conversation around the water cooler this morning. Give the chain's release a little look-see.

It put $0.18 a share on the scoreboard, which was in line with expectations. However, its revenue number looked to be a little on the light side. But the bigger news was its first-quarter outlook: It's calling for a loss of $0.02 to $0.05, which isn't too hot because analysts are looking for a loss of $0.02.

My view:

1. In my last take on the company, I suggested that in order to win back the hearts and minds of the investment community, it would have to blow out the estimate. (See Nine Things to Consider Before Trying On Hot Topic.) While the results weren't horrible, they hardly blew me away and aren't inspirational enough to draw throngs of fence-sitting investors in, either. And the first-quarter outlook is lousy, which is likely to dissuade bargain-hunting bottom-fishers.

2.
I'm thinking the shares are going to be under some pressure in the near-term as the sell-side probably won't have too many nice things to say about the release -- specifically its near-term operational performance potential.

3. All that said, I continue to believe this could eventually create one heck of an opportunity; the chain, which is still popular among younger folks, will get momentum back and start humming again. But my gut tells me that there will be a better entry down the road, so I'll reevaluate the lay of the land in a month or so.

Dr. Pepper Snapple (DPS):
UBS upped its rating on the soda company to Buy, per Justin Sharon.

My two cents:

1. I'm bullish on soda companies across the board, including Pepsi (PEP) and Coke (KO). With people more likely to spring for a night out at their local pizza or burger joint because of the improving economy, I think these companies are in a pretty good place right now. To boot, you've got warmer weather coming, which should goose sales of non-alcoholic beverages, too.

2. At 14.6 times this year's estimate, it's not ridiculously cheap but a decent value considering its near- and longer-term potential to carbonate the bottom line.

Yahoo (YHOO):
Benchmark cut its rating on the one-time high-flyer to Hold.

I'm still a bull on the long-term prospects of this organization and think there's a lot more upside potential for the shares over the coming years. I also remain a fan of Carol Bartz, and like the way she handles herself. But I'm no dummy; I realize that some of the excitement regarding its comeback has waned a bit, and this downgrade probably won't help the situation. If I were on the sidelines, I'd probably remain there and wait (and hope) for a better entry point. But if I were long, I'd probably continue to hold on.

Have a great day!
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No positions in stocks mentioned.

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