Jones Apparel Group: A retail sector hybrid with promise

In general, the company has done an admirable job cutting costs, closing stores, and eliminating redundancies, while focusing on its core brands: Jones New York, Anne Klein, Nine West, Gloria Vanderbuilt, and l.e.i. However, JNY still has the 'critical mass/economies of scale' in store fleet that institutional investors like.

JNY will likely increase market share amid the retail carnage, but sales with remain challenged through Q2 2010: look for a 1-3% increase for all of 2010. The First Call FY2009/FY2010 EPS estimates for JNY are $1.14 to $1.30.

Technically, Jones Apparel's stock chart is strong -- an uptrend. Recently, the stock has dipped below the key, 50-day moving average, but view that as mostly year-end profit-taking by short-term IIs: JNY traded below $4 earlier in 2009. Hence, the pull-back is a buy opportunity. JNY will encounter psychological resistance at $20, but this should prove to be minor.

Stock Analysis: Jones Apparel Group Inc. is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in JNY now; then buy another 25% in one month, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your JNY position before February 2010. Sell/Stop Loss if you were to buy shares in this company: $8.

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