Three newsletter advisors see value in the shares of Kohl's (NYSE: KSS), with buyback expert David Fried, technician Jocelynn Drake, and options specialist David Nasser, all offering recommendations on the midpriced retailer.
Fried, whose Premium Buyback Letter focuses on stocks that are buying back their shares, has added Kohl's to his portfolio, which has beaten the S&P 500 by more than 158% since its inception in mid 2000.
He explains, "Kohls is luring middle-income shoppers away from discount stores like Wal-Mart and Target. Better pricing, merchandising, and smart promotions are marketed to shoppers who may think Macys is too high-fashion and pricey and Wal-Mart is too downscale."
The advisor notes that the firm has been expanding its product offerings, having recently signed deals to sell skateboard icon Tony Hawk's footwear, the new Ralph Lauren Chaps Home collection, Vera Wang-branded sportswear, Elle magazine-branded clothing and Food Network kitchen gadgets.
He says, "Continuing its torrid pace of expansion since it went public in 1992, Kohls plans to add 115 more stores this year to its existing 817."
He calls Kohl's a well-run company with a bright future and contiued growth. In line with his "buyback" focus, he notes that the company has reduced its shares outstanding by 5.5% in the last 12 months.
Drake, an analyst with Schaeffer Investment Research adds a technical and sentiment perspective, noting the stock has been a "stellar performer. Open put interest, she observes, outweighs call open interest among options, and this is at an annual high.
She says, "At no time during the past year have options speculators been more bearishly aligned against the shares." From her standpoint as a contrarian, that bearishness among speculators is considered a bullish factor.
In addition, she notes that the number of KSS shares sold short has risen to 10.4 million. She suggests, "An unwinding of these bearish bets could supply the security with some short-covering support."
Overall, the advisor notes, "This combination of growing pessimism against the stock's strong technical backdrop has bullish implications from a contrarian perspective. As traders shed their short positions and jump on the stock's bandwagon, the equity should enjoy a nice boost in buying pressure."
Nasser, editor of the Marketwatch Options Trader, is also a bull on the retailer. He notes, "Kohl's traded up to new all-time highs on several recent days. Stock volume patterns are strong and improving. There's solid support at 74 -- where the stock had failed to break through several times in the past."
For those comfortable with buying options, he recommends the KSS April 70 calls at a price of 6.40 or less. He notes, "we are buying an in-the-money call because the 75's have too much time value premium in them. If bought, stop yourself out on any close below 74."
For more stock picks from the leading financial newsletter advisors, visit Steven Halpern's free daily website, TheStockAdvisors.com.
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