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  • Why I Am Buying Dillards Stock Today (DDS) 0 comments
    Feb 25, 2013 3:42 PM | about stocks: DDS

    Dillards (NYSE:DDS) reported a record 4th quarter. Adjusted net income came in just .02 off the estimated $2.89 earnings per share (NYSEARCA:EPS) at $2.87 EPS. The resulting trading response was a nearly 11% sell off in the stock. For a company which was trading at a low 10X earnings.. This is a what in technical terms I would call a drastic over-reaction. We have a very profitable company Dillards, with 75 years of operations, improved margin, improved revenue, improved profitability and a miss of less than 1% the estimate marks for an 11% sell off?

    This is what I call the perfect contrarian buying opportunity.

    The other net positives are:

    • The continued share repurchase program announced by management last year and added $250 million to its pool in May. Further reducing total shares outstanding and undoubtedly being utilized in every down swing. (The average purchase price over last year was higher than the current trading price.)
    • Institutional ownership between 58-83% (depending on the reporting source.)
    • 10 straight quarters of consecutive sales gains. Suggesting (DDS) is doing a great job capturing market share.
    • Coming off the strongest 4th quarter in the 75 year history of the company. WIth an over all 14.1% increase in 4th quarter profit.
    • $92 Million still remaining in the share repurchase program with last quarters average purchase at $79.69 almost $3 higher than the current trading price.
    • Revenue in the billions showing year-over-year growth
    • Retroactive management which seems to be trimming costs and increasing margins. With a good handle on markets and segments that help the company maintain over all profitability and growth.

    While Dillards may not be a new kid on the block or a hot tech stock it is a name that will stick around and be around for a long time. For a diverse portfolio and even a chance to profit from a short term correction DDS has all the makings of a good trade.

    Disclosure: I am long DDS.

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