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I’ve been keying on shares of teen retailer American Eagle (AEO) in the last month, arguing at various points about the strong brand, excellent growth prospects, and cheap valuation. Sometimes though, it is best not to overthink things.

The reasons you should buy AEO can be summed up in three lines:
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For those who have been following Pre-Paid Legal Services (PPD) the past few months have been a mix of jubilation and horror as the stock has been extremely volatile, trading in the high $30s in late February to the low $70s in mid-July before hitting a low of $39.45 on August 10th and bouncing back to the mid $50s. Shares plunged following the release of quarterly earnings that showed slow growth, and the bad timing right at the top of the market led to a big sell-off. My current interest in the stock stemmed from its appearance on the Top 25 Stocks for August list that James put out. While the movement in the stock has been rather extreme it is important to look at the events that caused such huge changes in perceived value and to look at the real impact on the company in the future. Read the rest of this entry »

The article I wrote yesterday on Wal-Mart (WMT) has had a controversial reception, to say the least. Read the rest of this entry »

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As I mentioned earlier, for the next several weeks I plan on going through the 30 components of the Dow Jones Industrials in the hope of finding one or two good mega-cap buys. The first stock I picked happened to be near the bottom of the list alphabetically, and with shares also at the bottom of just about any range I could find I felt compelled to start with retailer Wal-Mart (WMT).
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Around the middle of the month, I update my quantitative model in order to find the worst stocks in the market - those being companies that aren’t very profitable, yet nonetheless trading at high valuations. For last month’s short list, the average return for the short list picks was 2.83% less than the S&P 500 (-8.6% vs. -5.7%), which is the benchmark for the model portfolio to beat. Although the results were mixed overall with winners just outnumbering losers, a few big losses from stocks like Sonus Networks (SONS) and Sapient (SAPE) helped the Short 25 portfolio beat the market nicely.

The new Short 25 list for the next month is: Read the rest of this entry »

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