All Dressed Up With Somewhere to Go
10/26/2009 12:00 pm EST
Jocellyn Drake of Schaeffer’s Investment Research says a men’s clothier is a Wall Street favorite, and its stock may keep moving up.
[Inside Wall Street columnist Gene Marcial wrote last week on BusinessWeek.com (“Jos. A Bank Is Dressed for Success”)] that Jos. A Bank Clothiers (Nasdaq: JOSB) is a growing favorite on Wall Street due to its strong expense controls, savvy promotions, robust sales, and comfortable cash cushion.
Analysts have been won over. William Rutherford, president of Rutherford Investment Management, says, "Sales of men's clothing have been brisk, and Jos. A. Bank has done a terrific job selling them in a tough economic environment." In fact, large institutional investors continue to add to their portfolios, including Fidelity Management, which has accumulated a stake of 11.6% as of June 30th, according to Bloomberg.
Furthermore, strong control of expenses has added to the company's bottom line. "Management has been very successful at driving sales through aggressive promotions and consistent advertising through all channels (its stores, the Internet, and catalogs)," says Richard E. Jaffe, retail analyst at investment firm Stifel Nicolaus.
The clothier beat the Street's estimates in the second quarter. It features a strong balance sheet, ending the quarter with $126 million in cash, or $6.80 a share, and no debt. That provides a comfortable cushion as the company increases its store base amid a weak economy. As a result, analysts expect the shares of JOSB to perform well this year and into the near future.
Technically speaking, the shares have definitely earned these accolades. The stock has gained more than 77% since the beginning of 2009. The equity has created a series of higher highs and higher lows since late November, and has recently begun to benefit from the steadfast support of its ascending 10-week moving average.
Meanwhile, option players are quite smitten with the shares. The Schaeffer's put/call open interest ratio for JOSB [recently stood] at 1.41, which is lower than 86% of all those taken during the past 52 weeks. In other words, options players have been more skeptical of the shares only 14% of the time during the past 12 months. In fact, the International Securities Exchange has reported 2.5 calls purchased to open for every one call purchased to open during the past two trading weeks.
However, the stock could benefit from an unwinding of shorted shares. More than 18% of the company's total float has been sold short, providing the stock with ample sideline money. In addition, only four brokerage firms offer up ratings on the security. Any fresh positive coverage could give the shares a boost. (It closed above $45 Friday—Editor.)