Validea is an intriguing newsletter that selects stocks based on the strategies of the market's most legendary investors. Here, editor John Reese takes a look at Aeropostale (NYSE: ARO).

"This mall-based clothing retailer targets youngsters age 14 to age 17 through more than 900 stores in 49 states, Puerto Rico, and Canada.

"The company has developed a new retail store concept called P.S. from Aeropostale, which will offer casual clothing and accessories focusing on elementary school children between the ages of seven and 12.

Continue reading Market 'legends' like Aeropostale (ARO)

Market 'legends' like Aeropostale (ARO) originally appeared on BloggingStocks on Thu, 08 Oct 2009 15:00:00 EST. Please see our terms for use of feeds.

In his Validea newsletter and his just published book Guru Strategies, stock advisor John Reese assesses companies based on the investment strategies of "legendary investors" such as Ben Graham and Warren Buffett.

Recently, the advisor has highlighted two retailers that pass his guru screens: Gildan Activewear (NYSE: GIL) and Jos. A. Bank Clothiers (NASDAQ: JOSB). Here's his contrarian look at the two out-of-favor firms.

"You might never have heard Gildan Activewear, a Montreal-based clothing manufacturer, but you may well have worn its products. Gildan sells T-shirts, sport shirts and fleece to wholesale distributors as 'blanks' -- that is, without logos or decorating. Screen printers then decorate the items with various designs and logos.

Continue reading Guru strategies pick apparel retailers

Guru strategies pick apparel retailers originally appeared on BloggingStocks on Wed, 18 Mar 2009 10:30:00 EST. Please see our terms for use of feeds.

During these times of crushing financial news, collapsing stock markets combined with tremendous volatility, government ineptitude (what else is new), doubt, pessimism, and yes -- fear --- we all need to hear the reassuring words of one of our most successful investment sages.

'My pal Warren' has been filling the media with market supporting bits of wisdom and backing it up by making strategic investments through Berkshire Hathaway (NYSE: BRK.A) and more investments utilizing his personal fortune.

Yesterday I received the following in an email quoting Peter Lynch, who managed to gain an average of 29.7% per year for 13 straight years while he was running Fidelity Magellan fund. Once someone asked him how he knows what stage the market is at, he replied:

• "If I go to a party, and introduce myself as a mutual fund manager to strangers, and they walk away from me and talk to other people instead, I know the market is near the bottom. If they sit down and ask me what stocks they should buy, the market is at normal levels. If they sit down and TELL ME what stocks to buy, the market is near the top."

Continue reading Serious Money: Peter Lynch, a simple view

Serious Money: Peter Lynch, a simple view originally appeared on BloggingStocks on Fri, 24 Oct 2008 15:47:00 EST. Please see our terms for use of feeds.

This post is part of a series in which TheStockAdvisors.com asked financial experts to name their top stock pick if McCain or if Obama wins the election.

"Obama's tax plan would give greater relief to the lower and middle classes; one retailer that would benefit from this is American Eagle Outfitters (NYSE: AEO)," says John Reese, editor of Validea, which follows the investment criteria of "legendary" investors such as Warren Buffett and Peter Lynch.

"Consumers have had to tighten their wallets and purses because of the slowing economy and rising food and fuel prices. Breaks for average Americans would be welcome news for retailers, which have sputtered amid the downturn.

"In the event of a retail surge, this teen-focused Pittsburgh-based clothing chain should be at the head of the line.

"American Eagle gets approval from two of my Guru Strategies -- computer models that are each based on the published approach of a different Wall Street great. What's more, the two strategies that like the firm are modeled after two of the greatest gurus, Warren Buffett and Peter Lynch.

"My conservative Buffett-inspired model looks for stocks with a lengthy history of steadily increasing earnings, as well as a conservative balance sheet.

"Eagle has grown earnings per share in eight of the past ten years, with EPS rising from $0.25 to $1.82 in that time, meeting the first criterion. In addition, the firm has no long-term debt, which my Buffett model loves.

Continue reading Obama stock: Middle-class shopping at American Eagle (AEO)

Obama stock: Middle-class shopping at American Eagle (AEO) originally appeared on BloggingStocks on Fri, 10 Oct 2008 13:00:00 EST. Please see our terms for use of feeds.

This post is part of a series in which TheStockAdvisors.com asked financial experts to name their top stock pick if McCain or if Obama wins the election.

"The GOP is traditionally known as the party that spends more on defense; thus, if McCain wins the election, one stock to benefit would be defense firm General Dynamics (NYSE: GD)," says John Reese, editor of Validea, which follows the strategies of "legendary" investors such as Warren Buffett and Peter Lynch.

"While McCain has talked tough about reforming the defense budget, he has also pledged to increase the size of the military, modernize the armed services, and push hard for strong missile defense systems -- all of which require serious spending.

"As a major producer of battle tanks and assault vehicles, armaments and munitions, battleships and nuclear submarines, and military information technology systems, this Virginia-based firm is thus likely to have quite a bit of work on its hands during a McCain presidency.

"Just as importantly, General Dynamics' finances and fundamentals are very strong, earning approval from both my Peter Lynch and Warren Buffett-based Guru Strategies -- computer models that are each based on the approach of a different investing great.

"Because of its moderate 18.14% long-term growth rate and huge annual sales of $28.7 billion, General Dynamics is considered a 'stalwart' by my Lynch strategy, the type of large, steady firm that Lynch found offered protection during downturns or recessions.

"Two big reasons my Lynch model is high on this stalwart: its yield-adjusted P/E/Growth ratio of 0.75, which signals that the stock is a bargain right now, and its 18.79% debt/equity ratio, a sign that GD has the conservative financing Lynch liked to see."

My Buffett-based model, meanwhile, likes General Dynamics' consistency. Over the past decade, its EPS have declined just once, rising from $1.46 to $5.10 in that time.

"The company's annual return on equity -- a figure Buffett used to find firms with the 'durable competitive advantage' he famously prizes -- has been at least 16.4% every year.

"GD has also retained $22.30 in per-share earnings in the past decade while increasing EPS by $3.64, showing it can earn investors a 16.3% return on the earnings it keeps. That's a sign of the strong management Buffett is also known to look for."

Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.

McCain stock: Defense play with General Dynamics (GD) originally appeared on BloggingStocks on Fri, 10 Oct 2008 10:10:00 EST. Please see our terms for use of feeds.

"While U.S. banks have struggled amid the credit and housing crises, Credicorp (NYSE: BAP) has excelled," notes John Reese, who assesses stocks based on the strategies of various well-known and time-tested gurus.

Here, the editor of the Validea newsletter looks at the Peru-based banking firm commerical banker and explains how it "passes the test" for four leading guru strategies: Peter Lynch, Martin Zweig, the Motley Fools, and William O'Neill.

"Credicorp's main subsidiary, Banco de Credito del Peru, actually grew its mortgage business 8.2% in the third quarter of 2007 (the most recent quarter for which data is available) as Peruvians' purchasing power continued to increase.

"My Peter Lynch-based strategy considers Credicorp a 'fast-grower' because of its 42.44% growth rate (based on the average of the three-, four-, and five-year earnings per share figures).

"Lynch famously used the P/E/Growth ratio to identify growth stocks selling on the cheap. By dividing Credicorp's 19.6 P/E ratio by that growth rate, we get a P/E/G of 0.46, which falls into my Lynch-based model's best-case category (below 0.5).

Continue reading Creditcorp (BAP): Leading gurus bank on Peru

Creditcorp (BAP): Leading gurus bank on Peru originally appeared on BloggingStocks on Fri, 25 Apr 2008 10:35:00 EST. Please see our terms for use of feeds.

One of history's greatest investors is Peter Lynch, who managed Fidelity's Magellan mutual fund from 1977 to 1990. For the most part, he focused on investments that he understood well, such as GE (NYSE: GE), Kemper, Starbucks (NASDAQ: SBUX) and so on.

So, what is he doing now?

Interestingly enough, he's an investor in a dot-com startup, Jackpot Rewards, which has raised $16.7 million so far.

It's hard to pigeonhole the company. For example, it is a for-profit entity -- yet it plans to contribute 50% of its profits to charitable causes.

The site is a place for consumers to get discounts, such as from Apple (NASDAQ: AAPL), Best Buy (NYSE: BBY), Nike (NYSE: NKE) and so on. And yes, these seem like the kind of companies Lynch would invest in.

Continue reading Peter Lynch looking for a dot-com 'ten-bagger'

Peter Lynch looking for a dot-com 'ten-bagger' originally appeared on BloggingStocks on Wed, 20 Feb 2008 13:45:00 EST. Please see our terms for use of feeds.

Is Peter Lynch's advice for buying retail stocks obsolete? originally appeared on BloggingStocks on Mon, 26 Nov 2007 19:00:00 EST. Please see our terms for use of feeds.

• Intel Corporation (NASDAQ: INTC) -- Q3 guidance
• National Semconductor Corporation (NYSE: NSM) -- Q1 earnings
• Western Digital Corporation (NYSE: WDC) -- Q1 guidance

• Texas Instruments Inc (NYSE: TXN) -- Q3 guidance

• Staples Inc (NASDAQ: SPLS) -- Q2 earnings, Q3 guidance
• Office Depot Inc (NYSE: ODP) -- Q2 earnings
• Harley Davidson Inc (NYSE: HOG) -- 2H2007 guidance
• Weyerhaeuser Company (NYSE: WY) -- Q3 guidance

A recap of recent earnings and guidance originally appeared on BloggingStocks on Wed, 12 Sep 2007 14:00:00 EST. Please see our terms for use of feeds.

While I generally believe that beating the market is nearly impossible, I think that the only way to have a fighting chance at doing it is through focus investing: Owning big chunks of only a few stocks. Diversification is the name of the game when it comes to reducing risk and, if you want to be diversified, I suggest an index fund. But if you want to beat the market, you have to bet big on a few stocks -- stocks that you are pretty sure about. Of course, such stocks only come along once in a blue moon. Warren Buffett has said that you only need a few good investment ideas over the course of your life to do extremely well.

If you're going to buy mutual funds with the hope of beating the market, I also believe in focus investing: Pick funds that only own a few stocks. Today's Wall Street Journal (subscription required) has an interesting piece of focus mutual funds like the Permanent Portfolio Aggressive Value fund, which owns just 36 stocks.

If you can find a focus fund with strong management, that's probably your best bet at beating the market with mutual funds. It's very unlikely that even the most talented manager can come up with enough good ideas to beat the market while owning hundreds of different stocks.

Of course, there's a trade-off. Portfolios that aren't diversified will often have greater volatility, and may experience some really bad years, whereas diversified funds will usually perform pretty close to the market.

Focus investing is not for everyone, but I would argue that it's right for most people who want to try to beat the market. Of course, there's nothing wrong with not wanting to beat the market. By giving up on beating the market and settling for an index fund, you'll be able to beat around 80% of active managers.

Focus is the key to beating the market originally appeared on BloggingStocks on Tue, 05 Jun 2007 16:56:00 EST. Please see our terms for use of feeds.

I'm a big fan of Peter Lynch's methods for finding exciting growth stocks before other people do. His strategy: Go to the mall, talk to your kids, and learn about the businesses. There will be plenty of time for spreadsheets and discounted cash flow when you get back to the office. In her column Three Places to Spot Investment Ideas, TheStreet.com contributor Jennifer Openshaw advises readers: Take it to the streets, take it on the road, and take it to expert customers.

Because the first book on investing I read was by Peter Lynch, my first stock pick came from my own personal experience. I worked as a cashier at a grocery store and noticed that many people were using the new Coinstar machine. An elderly lady explained to me that she'd been reluctant at first, but that the fee that Coinstar charged was not as valuable as the amount of time she could save with it. "Doing it myself instead of using Coinstar would be the equivalent of paying myself $1.50 an hour to roll change," she told me.

I talked to the Coinstar technician and then, with my savings from work that summer, took the plunge. I bought a hundred shares of Coinstar (NASDAQ: CSTR), and earned a solid return on it.

Reading Openshaw's column got me to thinking: There are some pretty weird places to find investing ideas. So I'm asking our readers to leave a comment answering this question: What is the craziest place that you ever found an idea for a stock? The person who contributes the strangest story will win the satisfaction of knowing that he or she had the strangest story.

The craziest place to find investing ideas originally appeared on BloggingStocks on Sat, 31 Mar 2007 09:10:00 EST. Please see our terms for use of feeds.

While it's hard to imagine Peter Lynch tossing Dan Loeb-ian epithets at incompetent executives, there is evidence that mutual fund managers are waking up from their long slumber and joining hedge funds in the fight for stronger corporate governance. Increasingly, prominent funds are pushing for governance changes, mergers and sales, and changes in management.

According to the Wall Street Journal (registration required), the change is motivated by practical factors: increased media and regulatory scrutiny of corporate governance is casting an eye at mutual funds (who for years have not been proactive shareholders), and they are facing competition from hedge funds for investor dollars.

I'm thrilled to see mutual funds stepping up to the plate, and taking on their responsibilities to shareholders. For too long it seems, management teams have been insulated from the shareholders by the mutual funds that wouldn't do anything. As Carl Icahn has said, "With some exceptions, the wrong people are running U.S. companies. It's been that way for years, and it hasn't gotten much better." With increased spotlight on management at publicly traded companies, and the specter of activist hedge funds and less-lethargic mutual funds haunting the boardrooms of corporate America, maybe that will change.

Mutual fund managers waking up from their slumbers originally appeared on BloggingStocks on Sun, 25 Mar 2007 11:10:00 EST. Please see our terms for use of feeds.

In a February 24th column in the Wall Street Journal, Bill Coles talked about his love of Arthur Conan Doyle's short stories featuring Sherlock Holmes. I enjoy Holmes, but prefer Agatha Christie's Belgian sleuth Hercule Poirot. Why am I writing about this on BloggingStocks?

I believe that investors can learn a lot about methods of research and thinking about investing from reading the classic detective stories and novels. The way that they approach problems, think of solutions that others are likely to miss and do copious research, never accepting the obvious answer. These are all the characteristics of great investors, from Warren Buffett to George Soros to Peter Lynch.

Want to learn more about applying the methods of the great literary detectives to your investment research? Believe it or not, there's actually a book about it: Robert G. Hagstrom's The Detective and the Investor: Uncovering Investment Techniques from the Legendary Sleuths. This is not a book I would suggest to every investor, but if you enjoy a good mystery yarn as much as I do, you will want to pick up a copy.

Sherlock Holmes: Good reading for investors? originally appeared on BloggingStocks on Wed, 14 Mar 2007 15:13:00 EST. Please see our terms for use of feeds.

Invest in what you know -- always originally appeared on BloggingStocks on Fri, 09 Feb 2007 16:14:00 EST. Please see our terms for use of feeds.

Hidden in the latest earnings release from Canadian Solar Inc. (Nasdaq:CSIQ) was this interesting observation from Chief Executive Shawn Qu about Germany, a huge market for solar energy.

"I just returned this past Saturday from another visit to our key German market. Unlike earlier
visits, I observed some weakness in this important market, which I believe is
attributable, in part, to inventory clearance efforts by smaller solar module
makers, many of whom are, I believe leaving the market," he said.

Qu added that industry consolidation will benefit the company -- which despite its name is based in China -- in the mid- to long-term. the short term was going to be difficult since " the current inventory clearance efforts by these smaller solar module makers have caused some of CSI's German distributors to delay or
reduce their end-of-year product stocking plans, thereby impacting CSI's
near-term operating results."

Legendary investor Peter Lynch, whose fondness for solar power is well-known, told me he isn't worried about a slowdown in this key solar market.

"I would certainly expect some slowdown given the rapid growth of the past years, but if so, it is only temporary and some of it will be picked up from other parts of Europe and Asia," he wrote in an email. "We are only at the very, very beginnings of the solar growth phase...........it have many decades to run."

Continue reading German solar slowdown doesn't worry Peter Lynch: Interview

German solar slowdown doesn't worry Peter Lynch: Interview originally appeared on BloggingStocks on Tue, 06 Feb 2007 17:25:00 EST. Please see our terms for use of feeds.

Not that it needed any help, but it appears that the sun is getting a big surge of power. Well actually, it's solar stocks that are getting a jump start. With support from an article by Peter Lynch for www.Investorideas.com , I'm staying on the solar band wagon.

Many of our readers know that I've been up on this solar game for a while now, especially those oil heavy fund managers who have been laughing at me from Wall Street. I hear that laughter and I'm reminded of the billions of dollars lost in natural gas options this past year. Yes, it's a tough world in the energy game and I believe that for those who refuse to get in step, it's going to get tougher still.

Continue reading Peter Lynch says it's time for your day in the sun!

Peter Lynch says it's time for your day in the sun! originally appeared on BloggingStocks on Mon, 05 Feb 2007 15:15:00 EST. Please see our terms for use of feeds.

Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.

Johnson & Johnson (NYSE: JNJ) is a favorite conservative investment idea for 2007 from John Reese, editor of Validea, a newsletter that screens stocks based on the strategies of well-known investors such as Warren Buffett and Peter Lynch.

The advisor notes, "I am especially confident in my picks when multiple strategies identify a particular stock as desirable. This is the case with Johnson & Johnson. The stock gets a 100% match based on the Cornerstone Value Strategy developed by James O'Shaughnessy, a 93% score based on the Warren Buffett approach, and a 91% score based on the Peter Lynch method.

"O'Shaughnessy looks for large, solid companies. Cash flow per share must be higher than the market's average cash flow per share, which is currently $2.08. JNJ's is a healthy $4.55.

"JNJ meets Buffett's requirement that earnings have increased every year for the past ten years, and it also has little debt (it could extinguish debt with earnings in less than two years). JNJ also has a return on equity that has consistently been above 22% for the last ten years. It also has strong cash flow of $1.81 per share.

"Finally, JNJ might be appealing to former Fidelity Magellan manager Peter Lynch. Based on its past growth rate and sales levels, Lynch would classify JNJ as a stalwart -- a stock that can produce strong capital appreciation and hold up well in an economic downturn. Its yield-adjusted PEG ratio is 0.93, which this strategy would find acceptable, and its debt-to-equity ratio is around 6%, which is very low and another positive."

Top Picks 2007: Reese screen calls JNJ a Buffett/Lynch buy originally appeared on BloggingStocks on Wed, 27 Dec 2006 14:30:00 EST. Please see our terms for use of feeds.

Quantitative analyst and editor of OTC Insight, Jim Collins sees opportunity in Steve Madden (NASDAQ: SHOO), a shoe designer whose products are distributed through department and specialty stores, its 95 retail shops and its e-commerce site.

Fundamentally, Collins is attracted to a recent new product launch known as the "Design your Own" collection, which lets buyers choose between the size of the heels and the patterns, materials, finishings and colors to customize their own shoes. Collins points out that there are a total of 4,221 possible combinations.

Technically, Collins looks to the stock's very high relative strength ranking of 98 out of 100 as well as its solid score of 'B' for accumulation-distribution. He does caution that the company is exposed to fashion risk, which he notes can be difficult to predict. Despite these risks, he has selected the issue as his latest featured investment.

Validea has an unusual approach to stock selection; editor John Reese assesses companies based on the strategies employed by "legendary investors." In the case of his latest buy, Finish Line (NASDAQ: FINL), the stock was chosen based on the value methodology used by Benjamin Graham (Warren Buffett's mentor) and Peter Lynch.

Continue reading Step to it: A trio of shoe stocks

Step to it: A trio of shoe stocks originally appeared on BloggingStocks on Thu, 07 Dec 2006 11:15:00 EST. Please see our terms for use of feeds.