Why I'm Back to Buy More Tile Shop

It was just under two months ago that my Special Situations portfolio bought more Tile Shop (NASDAQ: TTS  ) . I'm buying more again this week, before we hear the latest earnings news. Of all the stocks in my portfolio, Tile Shop offers the best chance for serious gains over the next five to 10 years.

The prospects at Tile Shop look fantastic. At year-end, the company had just 90 stores in the U.S., and it looks to expand that count by 20 this year, unit growth of 22%. The U.S. should be able to easily support 400-plus stores, so there's a long runway for growth. That buildout should occur over the next eight to 10 years, providing years of supercharged growth for the stock.

Same-store sales should remain robust in 2014, even if they're lower than what the company put up in 2013 (12.4%), a real rebound year for the housing market. The company is projecting comps of 5% to 7%, a solid performance from a growing concept. Undoubtedly, the horrid weather of early 2014 will negatively affect comps, so the first-quarter report -- coming up next week -- may look weaker than the company can do for the year.

Tile Shop should benefit from a cyclical improvement in the economy and housing as well as the secular move toward tile in homes. So the big picture still looks very attractive here.

And as I mentioned in my last buy recommendation, I will continue watching the governance issues at Tile Shop. This issue is at the top of my list of concerns for the company. That said, I was pleased to see an insider, a director, buy $1.5 million in stock in February at prices around today's. Two other directors also made sizable buys in late February. In light of the recent governance issues, these purchases provide a needed reassurance.

Foolish bottom line
I'll be adding another $500, not quite a full percentage point, to an already-overweight position, which is 8% of my Special Situations portfolio. I'll have more great investment ideas in the next few days, so follow me on Twitter (@TMFRoyal) to get the latest.

6 stock picks poised for incredible growth
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.

Interested in Tile Shop or have another stock to share? Check out my discussion board or follow me on Twitter @TMFRoyal.


Read/Post Comments (1) | Recommend This Article (10)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 24, 2014, at 3:17 AM, Interventizio wrote:

    This is a kinda speculative bet, but I too am confindent the company will do better when housing picks up.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2926191, ~/Articles/ArticleHandler.aspx, 10/1/2014 10:58:37 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement