The TJX Companies: Still sailing despite rough recession currents

Posted May 12th 2009 5:45PM by Joseph Lazzaro
Filed under: Stocks to Buy

A retail play? In this consumer spending environment? Indeed, it is possible, with the correct business model and a tight stop.

The TJX Companies, Inc. (NYSE: TJX) fits the business model requirement. Off-price family apparel and home fashion retailer TJX (operator of the T.J. Maxx, Marshalls and HomeGoods chains) is poised to gain market share in the era of the 'frugal consumer.' The First Call FY 2010/FY 2011 EPS estimates for TJX are $2.00 to $2.21.

Other positives: Improved inventory management has supplemented about $150 million in planned cost reductions. That said, the recession's macroeconomic headwinds are capable of ruining even the best business plans by experienced corporate performers, hence a tight stop is being deployed.

Stock Analysis: The TJX Companies is high-risk stock. Consider buying a 25% position in TJX now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your TJX position in the first half of 2009. Sell/Stop Loss if you were to buy shares in this company: $22.

Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

Tags: The TJX Companies, TJX