"Stocks have struggled lately after their huge recovery; still, I continue to see opportunities, and I especially like Urban Outfitters (NASDAQ: URBN)," says Mark Skousen in The Turnaround Alert.
"Urban Outfitters, the apparel retailer, after it beat Wall Street analysts' estimates. Two years ago, the stock was selling for $37 a share.
"But today, it's selling for nearly half that. During the deep recession, retailers have seen sales drop as consumers cut back on spending for clothing and other discretionary purchases. As a result, retail apparel stocks fell sharply.
"Granted, net income for Urban Outfitters declined 28% on revenues of $1.8 billion, but overall sales fell only 2% for the year. Urban's brands have held up well compared to their competition (Abercrombie & Fitch, GAP, etc.).
"Analysts think that Urban did better than expected because of better margins in its 300 stores, suggesting that the company is controlling the effect of discounts on its profits. I expect margins to continue to improve and business to stabilize even more in the next few quarters.
"The stock's price/earnings to growth (PEG) ratio is under 1 -- a good sign for long-term growth. Plus, Urban has zero debt, and plenty of cash to expand its business.
"Let's buy Urban Outfitters Inc. (URBN) at market today and set a protective stop of $16 a share here. For those more adventuresome, consider buying December $30 calls."
Steven Halpern's TheStockAdvisors.com offers a free daily overview of the favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.
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