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Strategies & Market Trends : Buffettology
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To: Paul Senior who wrote (3803)7/6/2006 9:03:45 PM
From: Shane M  Read Replies (1) of 4691
 
Paul,

on the retailers. I've got a very close eye on CHS. I also think it needs to fall more though at this point. I'm cautious about retailers in general and had vacated the sector - although I did enter COH Coach a couple weeks back as my only current retailer. CHS's daily price action is weak right now too making me think there are lots of sellers sitting on top of it waiting to sell as it moves back up.

CHS seems to be in that limbo a growth stock sometimes hits where it's disappointed the growth investors, but isn't cheap enough for the value folks to step in. The marginal growth at Chicos is getting harder and harder to attain and it's pulling down their returns on equity and capital. The figures are still very good, but not the eye-popping returns they used to have. ROE dropped from over 40% 6 yrs ago to 28% now.

I do some return on marginal equity (change in earnings divided by change in equity over @ 5yrs) and return on retained earnings (change in earnings divided by sum of overall earnings less dividends over @5yrs) calcs like are discussed in the book, and if I'm thinking about it right it seems CHS still gets very good results on the marginal equity it's putting to work -somewhere between 22-28% is my estimate.

That said - I'm a CHS buyer when/if it gets into the low 20s. Probably starting to nibble if it hits 22. I won't be suprised if it gets there based on daily action in the stock
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