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TJX: A "Discounter" for your Portfolio
10/19/2018 5:00 am EST
1968 was a great year for my family; my brother, sister, and I all got married that year. But it was a terrible year for the USA; there were assassinations, riots, and bitter divisiveness over the Vietnam War — many thought the country was on the brink of collapse, asserts Neil Macneale, editor of 2-for-1.
In spite of all this, we did survive that time and the country, and my family, grew and prospered. I see conditions just as perilous in the country today. The chaos in Washington is almost beyond belief.
The government and the economy is running on unsustainable debt, and the stock market is a Ponzi scheme waiting for the last “greater fool” to realize he/she has been duped. The precipitous drop in the market recently may signal this has already happened. But my thoughts are that the country will survive and market prices will revert to the mean. Hang in there.
Meanwhile, our long-term strategy is to continue to add one stock to our 24-stock portfolio each month, while eliminating our oldest holding. Each new stock that we add is chosen from among those that have announced stock splits.
TJX Companies Inc. (TJX) is a company 2 for 1 has owned previously, from 1/2012 through 7/2014. Our overall return with this company at that time was over 22% annualized and we’ll hope for a repeat when we add it to the portfolio next week.
TJX is a discount clothing and home décor retailer operating over 4000 stores in nine countries under the T.J. Maxx, Marshalls, HomeGoods, and Sierra Trading Post brand names, among others.
Valuation numbers, PE and Price-to-Book, are higher than usual for a 2 for 1 pick, but seem to be justified at this time due to the accelerating growth in both sales and earnings. TJX pays a 1.4% dividend and is significantly less volatile than the overall market.
Returns and profitability numbers are consistently better than those of the competition. Looking down the road a year or two, TJX is one of the companies that may actually profit from the downturn in the economy that is surely coming.
We owned TJX and Ross Stores (ROST), both discount retailers, during the early recovery period after the great recession, and they both did very well for 2 for 1. Meanwhile, I’m happy to have another defensive stock in the portfolio.
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