U.S. banks held over 50% of Mexico’s debt during the Latin American Debt Crisis. Their exposure caused panic in the capital markets and the S&P 500 began to tumble in late 1980. After a 25% fall from its highs, the market capitulated in August 1982 when Mexico’s Finance Minister announced default. The IMF intervened and the S&P 500 rallied hard for two years.
~FIN
I initiated a swing trade on Friday, going long ANF. Analysts have started to question if Abercrombie’s brand is exportable. True, Abercrombie over-expanded in Europe at the wrong time. The flagship stores in London and Milan reported significantly lower sales for the quarter. I was not very surprised, but the market was shocked and shares subsequently fell 22%. I see opportunity in what the market has judged to be an awful quarter.
– Sales increased 21% for the quarter yr/yr.
– International sales were up 56% for the quarter yr/yr.
– ANF has a strong balance sheet, hardly any debt and $826M in cash.
Despite what analyst are saying, Abercrombie’s brand is growing in international markets. Currently shares are settled right above a level of support that was tested back in early October. In the near-term I see shares rebounding from this level and rising back above $61.00. In the longer-term, ANF’s estimated intrinsic is around $77.50. My stop-loss on this trade is $57.
Update: Sold out for a small profit.
October 26, 2011
Respect Copper
I am bullish on copper. After its September demise it touched $3, it just retested that low the other day and now it looks like it wants to fill its gap and head back to $4. Despite all the technical bullishness in copper right now, I feel like speculating on a potential source of future demand. A recent study funded by the U.S. Department of Defense demonstrated that copper could reduce bacteria in intensive care rooms by 97%. Hopefully that will convince all the hospitals in the world to line their walls, ceilings and floors with copper.
For other reasons I have been buying FCX, the mammoth gold & copper miner. My first entry was around $34 a couple weeks ago and I bought more today. I do not intend on taking profits until around $41-$42. If I get stopped out protecting profits it will be below $38 on significant volume.
I also initiated a position in SLV. Seasonally silver has done well in November and technically it looks bullish. I would like to see the gap fill from September. Stop-loss is right below $32.
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