Frugal Consumers Mean Family Dollar Success
Luxury is out, and will be for a long time.
Here's what I'm focused on besides the rapidly approaching weekend:
Family Dollar (FDO):
The stock had a pretty sweet run yesterday on big volume, and I'd venture to say there are still some bucks to be made here.
In case you missed it, Family Dollar reported a better-than-expected first quarter and painted a nice picture for the second quarter, too.
1. I've been a bull for quite a while and nothing's changed. The company has pummeled estimates the last three quarters now, and it still trades under 14 times this year's estimate, which I think is reasonable given its performance.
2. In my opinion, folks who think luxury retailers are suddenly going to rule the roost are out of touch. Americans are going to be a frugal bunch of consumers for the time being, and that plays right in Family Dollar's favor.
Taser International (TASR):
This company buzzed higher in yesterday's session on hefty volume. The reason: a solid fourth-quarter outlook.
So is this one-time high-flyer back?
1. Above $5, a heck of a lot more people will be paying attention to Taser. I'll also concede that three to five years out, the company has solid potential for growth.
2. But next year its EPS line is still expected to be a bit paltry. So at the end of the day, there are better opportunities out there. Sorry, Taser bulls.
Hot Topic (HOTT):
Justin Sharon points out in his article today that Needham knocked its rating down to Hold.
1. The stock had been the hit of the party around springtime in '09. This year, not so much -- at least, not yet. I'm concerned that, should it pierce through that $5 mark, some investors might lose interest.
2. But I do see opportunity here. The bar seems to be set low on the earnings front, so I'm keeping a close eye on it.
3. Insiders, a little open-market activity on the buy side would probably go over pretty well right now.
Rite Aid (RAD):
JPMorgan lowered the company to Neutral.
I'm not overly keen on it right now either, given its earnings outlook. In the drugstore space, I'm much more interested in CVS (CVS) and Walgreen (WAG). Walgreen is trading at 15.6 times this year's estimate, and it's a solid deal given its future growth potential (meaning five to 10 years down the road). It's my favorite among the drugstores right now.
Have a great day!
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