Finding Good Within the Bad

traderchild

Junior member
15 1
Retail sales weren’t anything to shout about yesterday. The diminutive 0.4% increase was driven only by a 1.8% increase in auto-purchases. This stall in momentum definitely raises questions about overall economic growth – especially on the heels of slow-down talk during the Fed meeting last week.

However, if the Russell 2000’s ascension is anything to go by, there are companies to watch within the small-cap retail space. And even with its impressive run, the index is still well off of its highs from back in 2007. As long as the Fed keeps its current policies in place, I’m predicating substantial headroom.

What’s more, mediocre retail sales coupled with other somewhat stagnant numbers should keep the Fed (and for that matter, Fed-speculation) in-line with continued bond-purchases. That’s good news for retail plays that do show strong sales and upward-promise.

I’ve got my eye on one in particular today: $CROX.

The company that used to be a stalwart in the heinously ugly shoe-sector has undergone a bit of re-invention lately. Its clogs still generate upwards of 47% of total revenue, but Crocs Inc. has decidedly more diverse product offerings to give to consumers – more than 300 styles.

The company’s now effectively tapping into surging international sales and has seen a steadily increasing share price since 2008…when it was trading as low as $1. Even still, it’s well priced by a number of fundamental ratios. It’s also got a safe balance sheet with minimal debt and a strong cash portion.

The technical picture could soon prove more than intriguing too. Share price just took a bit of a dip and tagged the 50-day MA (well off of the 200-day). I’m still looking at a clearly defined ascending channel since late November, with resistance at around the $18 dollar level coming up shortly.

Should $CROX hit that level with volume confirmation, we could see an extended breakout. This is especially possible because the fundamental picture suggests room for appreciation.

Rationale:

Some of the best technical pictures are drawn on the backs of solid fundamentals and market momentum. At the end of the day, $CROX is still a value play and presents a good risk/reward ratio. Balance sheet strength coupled with the recent discount of a still-building technical case spell an opportunity to hop onto this profitable trend.
 
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