Is One of Wall Street's Strongest Stocks Now on Sale?
This best-in-class name on a 15-year winning streak fell after earnings. Here's why it could be an attractive buying opportunity.
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What do you think of when you hear the word “consistency”?
If you’re a sports fan, names like Tom Brady or Michael Jordan might come to mind. Ted Williams was incredibly consistent, managing to reach base in 48.2% of his career at bats.
In the world of investing, the late Jim Simons of Renaissance Technologies was the king of consistency. Simons racked up an average annual return of 39% after fees over a forty-year period.
Consistency Is Key
In the world of retail, no company compares to the names listed above, but there is one that stands out when it comes to consistency. That name is TJX Companies TJX, the parent of popular discount chains T.J. Maxx, Marshalls, and HomeGoods.
Shares of TJX Companies haven’t had a losing year since 2008, a terrible year that saw the S&P 500 fall 38.5%. TJX shares have gained 34% over the past year, and 145% over the past five years.
TJX Beats the Street
Prior to Wednesday’s opening bell, TJX narrowly exceeded estimates for both earnings and income. However, the company guided forward estimates lower for the current quarter, citing uncertainty due to tariffs. On a day that saw the S&P 500 lose 1.6%, TJX Companies fell by 2.9%.
According to its chart, TJX Companies is one of the strongest stocks on Wall Street. Despite Wednesday’s pullback, TJX remains above its rising 50-day (blue) and 200-day (red) moving averages, a bullish sign.
Before Wednesday’s pullback, TJX was overbought according to its RSI (relative strength index) indicator (black arrow). Now that the stock is trading off its highs, this is no longer the case.
A Nothing Burger?
While you never want a company you own to lower estimates going forward, I believe TJX’s warning on guidance will ultimately prove to be a nothing burger.
- TJX is far from alone in citing uncertainty due to tariffs. According to FactSet, of the 451 earnings calls since March 15, 91% mentioned tariffs.
- TJX didn’t lower guidance for the year, only for the current quarter. Is it possible that the company is managing sky-high expectations?
In a way, TJX is a victim of its own success. The company has such a consistent track record that its success has become normalized.
By lowering expectations, TJX is making it easier to exceed future expectations. Despite its presence in the weak retail sector, TJX made three fresh all-time highs just last week.
That type of outperformance is notable. I'm sticking with TJX despite Wednesday's warning.
At the time of publication, Ponsi was long TJX.
