STT Trader Graph

The following recommendation taken from a recent Tradersweb Newsletter. The graph below is taken from a recent STT Advisor.

Stock of the Day (10/19)

Tommy Hilfiger (TOM) designs and markets mid to upper priced apparel. Emphasis is on men's and boy's sportswear, but other men's apparel is included, and TOM has recently expanded into women's wear as well. TOM operates 65 retail stores and planned to open about 20 outlet stores in the latter half of 1998. Expansion is proceeding on four fronts: new brands; additional stores; women's wear; and geographically. Book value is expected to reach $20/share in 1998, giving a price to book ratio of just a bit over 2.0. Institutions own 32 million out of 47 million shares outstanding (68%). Long term debt is $650 million, return on capital is 11%, return on equity is 16.5%, and ratio of current assets to current liabilities is 5.0.(figures approx. and obtained from sources believed to be reliable).

The company has produced relatively steady earnings growth. Predicted growth rate is 23%, PE=13, nominal PE=18, and investment is estimated to offer 209% advantage (GIV) over a five year T-Bill. Analysts are generally positive, price pattern is satisfactory, and earnings are expected to reach $3.60-$3.70 this year, up from $2.99 in 1997.

Notice that the STT advisor posted an "open up" signal on 10/15 and then again on 10/22. These signals were in plenty of time to realize the subsequent gains.

This is an excellent example of what we mean by "Dynamic Investing". We have no doubt that TOM is a strong stock. However note that there would have been little reason to hold the stock in late August, especially in view of the general weakness of the market.

Opportunities like this occur infrequently for any particular stock, but it should be clear that watching this kind of medium term price movement can be highly profitable.