Retail earnings season looks strong for the quarter. I’ve been surprised by nearly every report I’ve read so far…
This isn’t a shock after the fantastic retail sales number posted this week. And after giving you a free on trade Wednesday, I’ve got a smaller-cap retail stock to watch that is just as good…
And yet, CNBC would have you believe the sky is falling.
Source: CNBC
Bloomberg headlines echoed much of the same sentiment Thursday morning, only to do an about-face following Apple’s self-driving car chip announcement.
Not coincidentally, the news broke around the same time the broader market rebounded, with some indices turning positive on the day.
Smaller-Cap Retail Stocks to Watch Despite the Bears
What hasn’t turned positive yet, however, are shares of Petco Health & Wellness Co. Inc. (NYSE: WOOF), which posted a double-digit-percentage loss on the day following what was, to be frank, a great earnings report.
Source: Fortune Research, Bloomberg
The company posted revenue of $1.4 billion versus $1.37 billion estimated — a 5.3% beat — while earnings per share came in at roughly 10% above consensus.
And despite those numbers, this smaller-cap retail stock closed down about 13% on Thursday.
Should that hold, it would mark a big higher low for the pet retailer, which plans to add 900 high-margin veterinary clinics to its stores over the coming months.
Those clinics will not only add to its bottom line, but seriously increase foot traffic — which in turn will increase sales.
We think this price drop is way over-done here, representing a great opportunity to come in and establish a position with a FREE BONUS TRADE.
An Update to Our Energy Plays
In addition to these smaller-cap retail stocks I’m watching, there’s been some movement among our energy watchlist members.
Shares in Arch Resources Inc. (NYSE: ARCH) and Consol Energy Inc. (NYSE: CEIX) were down Thursday as well. Warm weather and slowing China growth weigh on thermal and metallurgical coal markets, respectively.
However, we remain buyers of these two on weakness, as domestic U.S. prices for both coal types have not materially changed.
Moreover, on the met coal market side, a series of mudslides in eastern British Columbia has washed out road and rail lines that lead to Vancouver.
Vancouver is also the home of Westshore Terminals, which handles nearly all cargoes of Canada’s largest metallurgical coal producer, Teck Resources Ltd. (NYSE: TECK).
Without Westshore in operation, some cargoes will be re-routed through Ridley Island. But that facility is just half the size of Westshore and already booked with throughput, to some degree.
That means met coal prices are likely to remain at elevated levels, a fact that hedge funds selling ARCH are clearly unaware of.
But hey, that’s their loss… buy ’em on red!
All the best,
Matt Warder
Fortune Research
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