Pythia Cap
Equity Investing & Market Satire
Ross Stores is a catch-up play to TJX as it works to close its productivity gap. Off-price retail is strong as consumers seek value and plenty of inventory is available to buy. Better sales and selection make sellers and brands more willing to work with Ross, which draws more shoppers and improves inventory turns in a flywheel. x.comÂ
Discount retailers are a built-in recession hedge because consumers trade down rather than stop spending. Walmart, Costco, TJX, and Dollar General should benefit as worsening economic conditions send more shoppers through their doors. x.comÂ
TJX looks overpunished for its reporting difficulties given its solid balance sheet. It is one of the safest companies in the S&P 500; the last call's Sierra versus combined TJ Maxx and Marshalls reporting drew a harsh reaction. x.comÂ
Target looks appealing after fixing its inventory problems and returning to sales growth, while remaining far cheaper than its rival. It spent about four years on the inventory repair and cut prices on more than 10,000 products. x.comÂ
TJX Companies remains off the list because of its dividend cut, which still counts against it. x.comÂ
Altria, Johnson & Johnson, Waste Management, TJX, Linde, Costco and Quest Diagnostics add defense to a portfolio, scoring highest among S&P 500 stocks on an antifragility screen of low volatility, strong free cash flow, minimal debt and stable earnings. All are also trending up this year, with momentum scores above 75; Altria scores 100 on antifragility and J&J 99. x.comÂ
Dollar Tree and Kohl's are catching a strong defensive value trade as mid- and low-tier consumers aggressively chase discounts. Both delivered blowout profit metrics, and their shares jumped 15% and 21% respectively. x.comÂ
Costco is a wonderful execution story whose business only gets better through consumer pain. Its Kirkland brand is more valuable than 90% of consumer brands today. The stock has been too expensive this cycle, and not owning it in size was a mistake; it is worth owning, though the right entry level is unclear. Sysco's moves illustrate the deeper transformation underway. x.comÂ
Target's turnaround continues with a solid beat and raise. Same-store sales rose 3.8% and transactions 3.6%, with higher gross and operating margins. Guidance moved higher, beating a high bar, with a 120 bp increase in operating margin. x.comÂ
Ollie's Bargain Outlet is among the companies reporting this week, with thoughts on its earnings shared alongside Campbell's, Duluth and Lululemon. x.comÂ
Burlington Stores' pullback of over 15% after failing at its 2021 all-time high looks like a setup for a large bounce and continued multi-year breakout. The push to the high lacked climactic volume, and the lows show heavy accumulation, a theme for seven years. A trader selling $6.63M of October 340 puts, rolled up and out, is positioned for the same rebound. x.comÂ
