Personally, I'm a bigger fan of buying stocks when they're breaking out to new 52-week highs due to strong technical and fundamental factors, as I think that gives traders the best chance to make real money. However, I never want to turn my nose up at opportunity when I see it, and I see it right now in three severely beaten-down retailers.
The first of these out-of-favor fashion stocks is Abercrombie & Fitch (NYSE: ANF). The teen clothing merchant, known for its sexually tinged and provocative ad campaigns, has been one of Wall Street's biggest retail duds over the past year. Prior to the early August plunge, the stock had already been down nearly 30% year to date; however, that loss accelerated another 10% after ANF issued a ghastly forecast for a decline in same-store sales in the second half of the year.
The retailer also lowered its full-year earnings forecast, saying that it now expects earnings per share will be $2.50 to $2.75, compared to previous estimates of $3.50 to $3.75. The Street was expecting to see EPS of $3.36.
The chart of ANF above shows the price destruction that's taken place in the shares, but for traders looking to get into this battered play, now may be a great bargain-buying opportunity before the company reports earnings on Aug. 15. If ANF manages to even get close to lowered expectations, we could see a nice pop in the shares. Given the fact that the stock is trading at multi-year lows, now could be the best sale the store has offered in a long time. (more)
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