The stock market and words like "Dow" still strike fear into the hearts and minds of the many who lived throughthe stock market crashes of 2008 and 2009. But the market is on the mend and there are some promising stocks that could become breakout hits for 2010 if investors don't get overly trigger-shy.
Telecommunications and computing stocks are some of the safer bets, but credit and gaming stocks could potentially offer big rewards to the more aggressive investor. So what are my picks for 2010?
Is it time to take a bite out of Apple, Inc (AAPL) or leave it on the vine? After reviewing the current list by examining the stock yields and price-to-cash flow (P/CF) we will take a look at Apple for 2010.
Yesterday I dropped two stocks, but the list is still too long. In the coming weeks there will be more cuts and if I find anything of more value perhaps there will be something new.
Today it's time to do some trimming of the fourteen stocks and four options on the contenders list. This review will prioritize the companies by price-to-book (P/B), price-to-sales (P/S) and return-on-equity (ROE). This does not preclude more possible stocks being added and the final list will not be done until the end of the month.
We will also compare recent stock prices to three-year highs to give us a relative idea where the stock floated in rosier times.
Aeropostale (ARO), a mall business whose related stocks include Gap (GPS) and American Eagle Outfitters (AEO), closed up over 4% at the end of Monday's trading session. The catalyst? According to the corporate press release, management has decided to allocate an additional $250 million to its share buyback program.
This is very interesting news because the big question on every investor's mind has to do with the current holiday season. How well will retailers fare during Christmas? Or, more accurately, will Christmas be as bad as everyone thinks it will be?
On Tuesday, November 24, American Eagle Outfitters (AEO) stepped into the earnings spotlight, reporting that third-quarter earnings came in at 28 cents per share. Taking a tax benefit out of the equation, AEO would have earned 21 cents per share, falling a penny shy of the consensus estimate.
Quarterly sales dropped to $749 million from $754 million, with same-store sales falling off 4%. AEO did not provide a fourth-quarter forecast, which it will do when it reports November sales on December 3; this will allow the company to account for the sales from the Thanksgiving weekend.
Back in August, I discussed my amazement at Abercrombie & Fitch (ANF). The stock just didn't seem to be acting in a manner which reflected the fundamentals of the business it represents. Well, my bout of amazement continues, because shares of the retailer are up 9% as of this writing on the latest earnings report. One that didn't impress me.
For the third quarter, Abercrombie made, on a reported basis, 44 cents per diluted share compared to 72 cents per diluted share in the year-ago period. After adjustments, earnings came in at 30 cents per share. Okay, that profit drop is bad enough, but wait till I get to the really bad stuff. Which would be revenues. Total sales declined 15%, but same-store sales were even worse: they plunged off the proverbial cliff, falling 22%.
There are only seven weeks left in the year, so it is time to start thinking about 2010. If you have been keeping up with my 2009 picks (see: Chasing Value: 2009 blazing picks -- Q3 review ) than you would be aware that the group is up 40% through the third quarter.
This year I bought all of my picks so that I would be riding in the same ship as anyone that might have considered my suggestions.
I will be breaking up my potential picks into three categories; contender, on the fence, and out of the running, until I finalize the list in the last week of the year.
The market continues to befuddle the bears as the third quarter earnings and stock prices continued to move in a positive direction.
During this period Washington has taken charge of the auto industry and helped prop it up with the "cash-for-clunkers" program. They continue to subsidize the real estate market with first-time home buyers incentives, and very low interest rates. The banks are being refueled by the Federal Reserve with interest rates as low as zero, while all the time currency stability has been sacrificed. This has driven gold prices to new highs.
This is the third review of my 2009 stock picks through September 30 (see: Chasing Value: 9 picks for 2009 -- APC, GE, ISRG, WFC and more). This years picks have annihilated index comparisons, so much so that I must attribute some of my good fortune to luck. However, I do believe the original reasoning was sound and the outlier nature of the gains certainly a result of an oversold market living in fear.
Could we see a bit of a drop from American Eagle Outfitters (NYSE: AEO) today? The retailer announced that its October same-store sales fell 5%, when the Street expected an increase of 1.7%. This disparity certainly seems to suggest that we could see the stock fall in today's trading action. The equity may find a measure of support from its 10-week moving average, which has filled this role throughout the stock's calendar-year rally. There seems to be some long-term support from AEO's 10-, 20-, and 50-month moving averages; all of which are in the $15 -$17 region. If the stock is going to fall, this support could be crucial. A drop through this resistance could spell a stock slide.
September same-store sales are rolling in this Thursday morning, and the news for the teen/tween retailers may hold some hope. Leading off the clothing genre is American Eagle Outfitters (NYSE: AEO), which posted perhaps the best news in the group. Of course, by best news I mean that AEO's sales didn't drop as much as people predicted.
The retailer had flat same-store sales in September, at the top end of its forecast range for a drop of 4.1% to flat sales. Thing is, these results will probably spur a bit of a rally for the stock, mainly because they weren't as bad as they could have been.
All three of the major indexes finished Tuesday in the red, but there were several big names that moved up to new 52-week highs in Tuesday's trading.
Walgreen Co. (NYSE: WAG): The drugstore giant had a really good day on Wall Street after posting better than expected earnings in the morning before the market opened. The company posted earnings of 44 cents per share versus analyst estimates of 39 cents. The stock set a new 52-week high of $38.44 and closed the day up 9.2% at $37.35.
American Eagle Outfitters (NYSE: AEO), a fashion retailer that competes with Gap (NYSE: GPS) and Abercrombie & Fitch (NYSE: ANF), didn't do too well in Q2. Total sales went down 5%, and earnings per share on a GAAP basis fell a most awful 50% to 14 cents. According to Bloomberg, the adjusted earnings of 12 cents per share came up short of analyst expectations by three pennies.
Same-store sales hit the double-digit mark to the downside: they decreased 10%. Not a good number for this kind of business. Promotional markdowns helped to drive the gross margin down. The operating margin also took a hit.
Aeropostale (NYSE: ARO), a retailer that competes with Abercrombie & Fitch (NYSE: ANF), American Eagle Outfitters (NYSE: AEO), and Gap (NYSE: GPS), posted what I thought was a superb second-quarter earnings summary on Thursday after the bell. The figures were very appealing, and I would've expected a better after-hours reaction by the stock to the news. Then again, the market can never be predicted. It will do whatever the heck it wants.
Net sales increased 20%. Not bad, am I right? Wait, check this out. Earnings per share came in at 57 cents, compared to the 31 cents reported in the year-ago quarter. According to Reuters, that was a penny ahead of expectations. But that penny beat on the bottom line isn't what impresses me the most. It's the strong per-share profit expansion that I find compelling.
The stock market and words like "Dow" still strike fear into the hearts and minds of the many who lived throughthe stock market crashes of 2008 and 2009. But the market is on the mend and there are some promising stocks that could become breakout hits for 2010 if investors don't get overly trigger-shy. 
Is it time to take a bite out of Apple, Inc (
Today it's time to do some trimming of the fourteen stocks and four options on the contenders list. This review will prioritize the companies by price-to-book (P/B), price-to-sales (P/S) and return-on-equity (ROE). This does not preclude more possible stocks being added and the final list will not be done until the end of the month.
Aeropostale (
On Tuesday, November 24, American Eagle Outfitters (
Back in August, 
There are only seven weeks left in the year, so it is time to start thinking about 2010. If you have been keeping up with my 2009 picks (see: 
The market continues to befuddle the bears as the third quarter earnings and stock prices continued to move in a positive direction. 
Could we see a bit of a drop from 
All three of the major indexes finished Tuesday in the red, but there were several big names that moved up to new 52-week highs in Tuesday's trading.
Aeropostale
Closing Bell: When We All Love the PIIGS (NBG, SQNM, PG, ERTS, KO)
Serious Money: Cheapest Stocks List Shrinks from 26 to 21
Chasing Value: Hasbro Earnings Makes My Point
