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JimVanMeerten (62.35)

Discountt foods in a discount market

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August 11, 2010 – Comments (2) | RELATED TICKERS: FDO

On Barchart Portfolio Blogs I bring to your attention stocks you might want to consider for your portfolio.

Enough bad news, let's look at a great stock. Family Dollar Stores, Inc. (FDO) is one of the fastest growing discount store chains in the United States. The merchandising concept responsible for this growth provides consumers with good values in low cost, basic merchandise for family and home needs. The merchandise is sold at everyday low prices in a no frills, low overhead, self-service environment. Most merchandise is priced under $10.00. Stores generally range in size from 6,000 to 8,000 square feet and most are operated under leases.

As the general consumer gets the jitters about their future they look for alternatives to cutting the cost of necessities they must buy and these stores are a good alternative. They have over 6,600 stores in 44 states so this is a real national chain. This stock has an A+ financial strength and a conservative management that always tries to increase shareholder value.

Wall Street brokerage firms have 13 buy recommendations published based on estimates that sales will increase by 6.30% this year and 6.10% next year. They project an increase in earnings of 24.60% this year, 14.30% next year and a 5 year annual compounded EPS growth rate of 13.58%.

The company has instituted a very aggressive share buy back program and already bought back 5 million shares. Major purchases by Nelson Peltz and the Trian Fund have made these shares a hot commodity.

The general investor has noticed this stock also and over on Motley Fool the CAPS members feel the stock will beat the market by a vote of 485 to 49 with the All Stars in agreement 158 to 12.

All the fundamental signs are there but for those of you that want a technical confirmation Barchart gives the stock an 80% short term and a 96% overall technical buy signal with 12 of Barchart's 13 technical indicators signaling a buy. The stock trades above it's 20, 50 and 100 day moving averages with a recent price of 41.81, way above its 50 day moving average of 38.98.

You can't ignore the 17 new highs in the last 20 trading sessions and 4 in the last 5 when the market has been down 4 out of 5 days. In a down market this stock has increased by 18.75% in the last month and has a 14 day Relative Strength of 70.87%.

The reasons why I like this stock and I'm adding it to my model portfolios is:

1 - The management of the company is conservative and the company has an A+ financial strength

2 - Stock buy backs by the company and investments by Nelson Peltz and the Trian Funds are a plus sign for me

3 - Technical price movement confirmed by the 14 day Relative Strength index of 70.87% and an increase of 18.75% in last months down market

4 -  Wall Street brokerage analysts are recommending to their clients based on double digit earnings increase projection Positive general investor sentiment.

Jim Van Meerten is an investor who writes on investing here and on Barchart Portfolio Blogs. Please leave a comment below or email JimVanMeerten@gmail.com.

Disclosure: No positions in the stock mentioned at the time of publication

2 Comments – Post Your Own

#1) On August 11, 2010 at 4:31 PM, jorercom001 (< 20) wrote:

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#2) On August 11, 2010 at 5:19 PM, JaysRage (89.42) wrote:

Ha ha.   Spam on spam.  

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