TJX: Back up the truck

Posted Nov 23rd 2009 5:30PM by Joseph Lazzaro
Filed under: Stocks to Buy

If you haven't already and you can tolerate moderate risk, now's the time to purchase shares of The TJX Companies (TJX) and I'm reiterating my buy rating, first recommended on June 22, 2009 at a price of $21.48. If you bought TJX in June, you're up about an impressive 80%.

Off-price family apparel and home fashion retailer TJX (operator of the T.J. Maxx, Marshalls and HomeGoods chains) is in the discount retail sweet spot: it's poised to gain market share in the era of the 'frugal consumer.'

TJX typically prices items 20-60% below comparable store prices, particularly for apparel, and that's a winning formula in an era where disposable incomes have been pinched. Same store sales should increase 4-5% in both 2010, with another, healthy gain likely in 2011. The First Call FY2009/FY2010 EPS estimates for TJX are $2.63 to $2.94.

Technically, TJX's stock chart is strong: a staircase, with only minor, constructive corrections, and a price that rarely touches the key, 50-day moving average -- a sign that institutional investors are taking advantage of the dip to establish/adding to their TJX positions. TJX will encounter psychological resistance at $40, but this should prove to be a pit stop. TJX is headed north.

Stock Analysis: The TJX Companies is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in TJX now; then buy another 25% in one month. Under any circumstance, don't buy more than 75% of your TJX position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $22.

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

Tags: apparel, tj maxx, TjMaxx