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Four Reasons TJX Companies Is a Good Deal


It expects to repurchase $900 million to $1 billion of stock in 2010.

Asian stocks rose overnight. The Hang Seng and the Nikkei were up 0.12% and 1.09%, respectively. European stocks were higher this morning, too. And here in the US, we're currently trading lower.

Here's what I'm seeing this morning:

TJX Companies (TJX):
It looks like the company is raising the bar.

The Massachusetts-based retailer said its December comps were up 14%, which was way better than the 5.6% jump the Street had been expecting. To boot, it indicated it's looking for $0.82 to $0.84 in the fourth quarter, which sounds pretty good because the estimate I'm seeing is $0.73.

And in the press release, this caught my eye: "Further, the Company now expects to repurchase $900 million to $1 billion of TJX stock in Fiscal 2010, more than originally expected, which underscores management's confidence in the business and would benefit fourth-quarter earnings per share by an incremental $.01, which is reflected in the updated guidance."

Kind of a trifecta of good news.

Some thoughts:

1. The stock deserved the goose it got in Thursday's session and it deserves to be trading higher still.

2. The fact that the company has been so willing to buy back stocks is a great indicator of the board's confidence, and possibly indicates where the shares could be headed.

As I discussed in an article a few months back, I'm still more fond of Target (TGT), but TJX is scratching me where I itch, too.

A fairer price for it would be somewhere in the mid to upper $40s.

Fossil (FOSL):
Is it time to scoop up Fossil?

The watch company offered up an upbeat outlook for both the top and the bottom line for the fourth quarter.

Some thoughts:

1. I wouldn't have figured this company to be doing as well as it has been, but it's been thumping expectations and the stock has taken off like a jet plane.

2. But my question is, where from here? It could possibly punch through a new high, and some newbies may jump on board. But I see some potential risk here. With the bar set pretty high, what if the company misses expectations or trips up in some other fashion? Will the Street be understanding? I doubt it. Analysts and investors want companies that continue on an upward trajectory, and that might be tough for it to achieve.

I'll pass this time.

Wendy's/Arby's (WEN):
Justin Sharon points out in his article this morning that Morgan Stanley lopped its rating to Equal-weight.

My take:

1. I'm gung-ho on McDonald's (MCD) and think it continues to have the best promise in fast food, bar none. And I particularly like what its done with its coffees. But I think Wendy's does deserve some attention here.

2. If it can pop up north of $5, I think analysts and funds will pay some attention to it. On top of that, I don't think the bar is set too high for it, so even a smidge of good news could give the shares a decent goose. My eyes are peeled.

Ericsson (ERIC):
Justin Sharon also points out in his article that Bank of America/Merrill lowered its rating to Neutral, and I don't disagree: The earnings outlook isn't too swift. I'm also not seeing any huge catalysts near-term or a reason to dabble here near the 52-week highs.

Have a great day and an even better weekend!
No positions in stocks mentioned.

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