In the spirit of Valentine's Day, Beth Gaston Moon, an analyst from Schaeffer's Investment Research, reviews a trio of companies that are poised to benefit from the sentiments surrounding the annual lovers' holiday.
Here, she looks at Tiffany & Co. (NYSE:TIF), with its coveted blue boxes; online jewelery retailer, Blue Nile (NASDAQ:NILE); and Limited Brands (NYSE:LTD), with its Victoria's Secret line.
The analyst explains, "The traditional robin-egg blue color of Tiffany & Co. is instantly recognizable, particularly among those with especially generous mates. The luxury retailer has been pointed skyward since early August, tacking on more than 40% and hitting a new 52-week high above the support of its 10-week moving average."
As a contrarian, she adds, "On a sentiment front, TIF could be in the midst of a short-covering rally. Last month, the number of TIF shares sold short dropped 12% as frustrated bears moved toward the exits.
"Nearly 7% of the stock's float remains shorted, however, amounting to a short-interest ratio of about seven days to cover. A continued 'short squeeze' could supply TIF with additional buying momentum. The March 40 call looks like an appealing, though slightly aggressive, play at this juncture."
"Support is firm, in the form of the stock's 10-week and 20-week trendlines, and short interest is quite a formidable force. Nearly 30% of NILE's available float is shorted, resulting in a massive short-interest ratio of 24 days to cover.
"In other words, it would take more than a month's worth of trading days, at the stock's average daily volume, to eradicate all of the current shorted positions." Overall, she concludes, "The equity's path of least resistance is skewed higher." For those comfortable with options, she says, "The May 40 call looks like a nice choice; if liquidity is a problem, consider buying some NILE shares."
Finally, Beth Moon Gaston looks at the company behind Victoria's Secret -- which, she notes, is also a popular shopping spot around this time of year. She explains, "The parent of the pajama boutique (and many other popular brands), Limited Brands could soon become one to watch.
"The stock has slowly gained momentum since the beginning of the year and is currently trying to muscle through its overhead 20-week moving average. A solid break through this trendline (taking it toward the $30 level) might make this a promising intermediate-term stock play or potential put-sell position."
Steven Halpern's TheStockAdvisors.com is a free website that provides a daily look at the latest stock ideas from the nation's leading financial newsletters.
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