I really don't have anything profound to say with this post but I was struck by the large divergence between Target (TGT) and TJX Companies (TJX).
Normally, companies in the same industry tend to track each with some minor variation — and what these companies did until about three years ago. Since then, TJX has race ahead of Target, and the gap has grown even larger this year.
Target still has a larger market cap than TJX ($34 billion to $21 billion). TJX's stock dropped earlier this month after missing earnings by two cents per share. That broke an impressive streak of meeting or beating. Meanwhile, Target had a good earnings report last week although it hasn't experience the profit growth recently that TJX has.
TJX now has a distinct valuation premium over Target. Target currently goes for 11.74 times Wall Street's consensus for this year's earnings, and 10.88 times next year's. TJX goes for 13.69 times this year's estimate and 12.24 times next year's.
This is a good example of the lesson I've told investors many times — don't concentrate so much on what a company does. Instead, focus on how well they do it. I can't tell you how many times investors ask me about some stock that's supposed to be the next "fill in the blank."
TJX isn't the next anything, but they executed their business very well and the stock has been handsomely rewarded.
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