Sozzi: Do Your Homework Early
Written by: Brian Sozzi
Tickers in this article: DG FL LOGI
Technology Pick: Logitech (LOGI)
- This name fits one important criterion I am using to pick stocks this coming earnings season: The company must have beaten earnings by a large amount in the first quarter. Plus, the stock has had to outperform the S&P 500 from when it began to correct on April 2.
- The company has announced a major restructuring plan that is about to benefit earnings. My sense is Wall Street's estimates are still too low.
- The company has significantly reinvigorated the product portfolio, for example infusing fashion into their wireless mouse products geared toward teens (where bright colors and patterns are selling).
- The company has exposure to the Apple ecosystem through new products introductions, for example a bolt on keyboard.
- For a very competitive industry, I was pleasantly surprised by the company's profit margin expansion in the first quarter. I expect this to continue amid new product introductions and cost benefits from its restructuring plan. The stock is too cheap at current levels.
Fashion Pick: Foot Locker (LG)
- Teens are expressing themselves through their sneaker choices (I call this the "Justin Bieber/Usher effect") -- bright colors, high tops, etc.
- The company is producing stronger same-store sales than main competitor Finish Line (FINL) .
- The company's nitty-gritty financials are better than Finish Line's, including: inventories are actually down year over year causing scarcity in the marketplace (Finish Line's are up about 14%) and merchandise margins are rising (Finish Line's are not).