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The Panic-Proof Portfolio (Stockchase Research) Foot Locker FL-N PAST TOP PICK Sep 15, 2020

(A Top Pick Aug 25/20, Up 18%)Stockchase Research Editor: Michael O'Reilly We set $35 as an upper objective for FL as a Top Pick and we have achieved that target. Goldman Sachs just initiated coverage on the company and set a $38 target so we will let our winner run. However, we are suggesting taking 50% of the position off the table. We also recommend trailing up to stop-loss to $26.50. Based on a measured technical move, we would now target $44 as our next upper objective.

The Panic-Proof Portfolio (Stockchase Research)

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DON'T BUY

It reports Friday. This used to be a crucial indicator of how Nike was doing, but no longer.

BUY

It beat earnings and shares are rising today. She bought this in February when they announced horrible earnings, but were planning to buyback half their shares and raise their dividend. There was so much bad news, things could not get worse. They have potential upside. Expectations got some horrible, that it's easy to buy.

BUY

She also owns American Eagle Outfitters and Ross in the retail space. Ross is actually up only 1% year to date, but up 40% in the past month. AEO is -40% YTD, up 50% in the last month, and Foot Locker is 15% YTD and 15% past month. The theme for all these--and why should bought them--was that the street punished these stocks so severely, expecting them to lay down and DIE and customers will never spend money again. Well, American consumers are very resilient and continue to spend. Yes, you should be in discount retailing, but this share has already shot up this month. The low-hanging fruit, the time to buy, was last summer--and people missed it. Forget 40% moves, but there will be some movement. She's holding onto Ross and Foot Locker, because there's still upside. Foot Locker remains cheap and still buying back shares. Do your homework in the retail space. Problem is that all the retail ships have risen in recent weeks and we won't see those gains again.

DON'T BUY

It once looked good: great CEO, fine dividend, but they cut that dividend and shares got hammered. His bad.

BUY

Today it reported same-store sales of -8%, but the beat the street's expected -10%, so shares jumped 16%. The CEO transformed Ulta Beauty from a dog into a success. He expects upgrades tomorrow.

DON'T BUY

2023 review

She had great faith in the new CEO whom he interviewed last March and bought a small position. The CEO came with a strong track record. He knew that turning around FL was a giant job, but it was impossible. He blew this call. FL was a flailing mall-based retailer. They reported ugly quarters in May and August, the latter reporting that sales sank 10% YOY and earnings -96% YOY. Lots of excess inventory. Awful. FL also halted their dividend, which is why many bought this stock. He was blinded by the CEO's great track record (and still believes in her), but the company had no chance for a turnaround. He should have known better.

SELL

In late 2022, he believed too much in a CEO who couldn't turn around an awful company. The CEO had a great track record and warned the turnaround could take a long time. So, he was patient and bought a small position. A big mistake. His mistake. Hubris. A turnaround can take a very long time.

DON'T BUY

Is holding on, since he bought this early, but won't recommend it. Stock has been a poor performer. Reports Thursday.

BUY ON WEAKNESS

They reported a great quarter two weeks ago, but shares tumbled 10%. The sellers don't believe the CEO's full-year earnings forecast. Is a buying opportunity.

BUY

Today, they reported a terrific quarter. The CEO's turnaround plan is taking hold as Nike repairs relations with shoe stores. So are Deckers, New Balance and Adidas. Though shares jumped 5.12% today, FL remains undervalued.

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