Target (TGT) seems like a very well run company based on their consistent growth in revenue and earnings (11% 5-year CAGR in revenues, 13% 5-year CAGR in EBIT, and 17% 5-year CAGR in EPS). This growth curve is nice and even too. It would appear that they will continue to grow in the future and therefore this would appear to be a great long-term investment in the retail space. In terms of timing, TGT has a low PE of 15 against an avg of 19 for the discount retail space. It also pays a small dividend of around 1% and is also buying back stock. However, since Oct of 2007, the stock has been stagnant to dropping, which appears to be due to a lack of investor confidence in the consumer discretionary space. Target specializes in household goods, clothing, and electronics which is consumer discretionary, not consumer staples. The worry is that consumers are shopping down on the chain towards lower-end discount chains, thereby reducing Target's revenues. I think when the consumer comes back Target should do well so the question is, when will it bottom? I'm looking at this dip in price as an opportunity. I will admit that Cramer and some other gurus have recently sold their TGT which is a bit disheartening, but sometimes you gotta go with your gut and be a contrarian. I'm hoping I can buy this near it's low and profit from an increase once this space gets back on track. Hopefully that's within the next year. There are some barrish technical indicators popping up this week after the earnings which I'm ignoring, we'll see whether that turns out to be a smart decision or not. This is a long-term investment, not a trade.
$51.97 (05/27/08)
