So from what I hear, Santa failed to deliver a lot in the way of clothing this Christmas.
Well, if that's true, you can't blame him. News from Denver aside, with the weather hovering in "early spring" temperatures over much of the Eastern Seaboard, I suspect the old gent decided to prioritize his deliveries this year. After all, there's only so much space in the sleigh. With Nintendo Wiis and Sony PlayStation 3s monopolizing much of it, and sweaters in little demand, cutting back on clothing deliveries this year was just plain good working capital management.
Yet while everyone was declaiming over how little St. Nick spent at the nation's trendiest clothiers this Christmas, Bank of America (NYSE:BAC) came out last week and upped its price targets on three such retailers: Urban Outfitters (NASDAQ:URBN), Aeropostale (NYSE:ARO), and Pacific Sunwear (NASDAQ:PSUN). What, one might ask, are those bankers smoking?
In fact, one Fool did ask that very question -- if more politely than I phrased it. In a column titled "Little Light From PacSun" on Friday, my Foolish colleague Jeremy MacNealy publicly mused: "Do these stocks truly deserve 'buy' ratings? ... As one who takes the time to investigate retailers both from a financial standpoint and at the store level, I believe that until these concepts juice up their merchandise, they will continue to be outgunned by the likes of Abercrombie, Guess?, and American Eagle Outfitters." Summarizing his thoughts, Jeremy suggested that "there's more speculation [in BoA's projections] than substance."
Au contraire, mon frere!
Past performance is no ... yada, yada, yada
Listen, I'm not going to don a straitjacket and run up and down Wall Street extolling the virtues of Aeropostale's meager 1.7% December same-store sales gain, and I'm even less impressed by PacSun's 3.2% decline, or Urban's 5% fall. Instead, I'm roosting with the other fence-sitters at Motley Fool CAPS, where our collective wisdom leaves us profoundly ambivalent on all three of these companies, each of which receives just three stars (out of a possible five).
But I can't fail to notice that, among the more than 500 investors who have contributed their thoughts on these three companies, Bank of America (in the person of its avatar, TrackBofASec) ranks very high indeed.
Not only does BoA score among the top 10% of CAPS players, generally, on its picks, but it has also demonstrated a keen understanding of the three retailers named in particular. Since the firm was first noted as recommending the purchase of Aeropostale shares back in August 2006, of PacSun in October 2006, and of Urban in November 2006, BoA's recommendations have outperformed the broader S&P 500 by 27%, 17%, and 9%, respectively.
In contrast, the only one of these stocks that we have "officially" endorsed at the Fool -- PacSun, which Tom Gardner recommended in the January 2006 issue of Motley Fool Stock Advisor -- has lagged the S&P by 29 points since the date of that recommendation. (Hey, you win some, you lose some. So in fairness to Tom, let me also point out that his other picks have trounced the market, building up a combined 40-point lead over the S&P 500 over the last four and a half years.)
Where was I?
Oh, yes. Bank of America and supposed speculative picks. Does BoA know what it's doing, or is the firm just "speculatin'?" The firm's illustrious record on CAPS suggests it's the former. I don't know about you, but if I ever do get around to investing in one of these retailers, I'm going to take a good, hard look at what BoA has to say about it before I buy.
Fool contributor Rich Smith does not own shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked 148 out of nearly 19,500 raters. Pacific Sunwear and American Eagle Outfitters are Motley Fool Stock Advisor picks. Bank of America is an Income Investor choice. The Fool has a disclosure policy.
