With gasoline prices finally in reverse, attention may shift to the Consumer Discretionary sector. The quarter has seen a big shift into the sector, with the S&P 500 (SPY) Consumer Discretionary stocks up 2.4% compared with the S&P 500, up just 0.3%. The performance is even better for smaller Consumer Discretionary Stocks. With less demands on the wallet for filling up the tank, I expect that some discretionary spending may materialize at the mall. In order to identify some potential names to consider, I ran a screen designed to identify positive price momentum as well as strong fundamentals and good valuation among companies that make or sell clothes. Here are the parameters I used:
- YTD Price Return > 10
- PE F12M < 14
- Net Debt to Cap < 25%
- Estimate Revisions - Past 3 Months > 0
Five companies made the cut - (click chart to expand):
Whether you like big or small, there's something to consider.
Ascena Retail (ASNA) recently changed its name from DressBarn. The company, which acquired the wildly popular tween retailer Justice (part of Limited Too), also operates maurices. As cheap as it looks (13 PE), the valuation excludes the fact that there is over $5 per share of net cash. Short-interest is 8% of the float, and insiders own almost 10% of the company.
Destination Maternity (DEST) operates 700 stores (Motherhood Maternity, A Pea in the Pod and Destination Maternity) as well as over 1000 leased departments to Sears (SHLD), Kmart, Macy's (M) and several others. The company also is the exclusive provider of maternity apparel to Kohl's (KSS). Short-interest is 3% of the float, and insiders own over 7% of the company.
Maidenform (MFB) manufactures intimate apparel, including a variety of well-known brands distributed 90% through wholesale and 10% retail. Short-interest is over 6%, and insiders own over 3% of teh company.
TJX Companies (TJX) just reported and has pulled back slightly. The company sells off-price clothing and housewares (T.J. Maxx, Marshall's). Short-interest is over 2% of the float, and insiders own less than 1% of the company (3.2mm shares).
VF Corp (VFC) manufactures clothing, including brands like Vans, Wrangler, Lee, The North Face, Nautica and many others. Short-interest is 6% of the float, and insiders own over 22% of the company.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.