Dives in Retail Are Buyable

 | Mar 11, 2013 | 2:39 PM EDT
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You waited for a dip. You got it. Dick's (DKS), that's a dip for you. Ross Stores (ROST), huge dip.


Worried the selling isn't over?

I have to tell you that I think both companies have now, in one fell swoop, lowered the bar to make it so you should feel comfortable buying them.

The market's got a real bias right now against discounters in pretty much every industry. Last week PetSmart (PETM) got dinged. We had seen Ascena (ANA) get crushed not that long ago.

And, of course, we saw Bed, Bath & Beyond (BBBY) and Best Buy (BBY) get crushed.

But take a look at the latter two players. Bed, Bath got mentioned this weekend as a possible private equity takeout. I have been saying that for some time. I believe that it could happen even as the near-term fundamentals aren't that strong. Plus people feel that Amazon.com (AMZN) can crush them.

But then again, isn't that what was said about Best Buy at $12-13? Have you seen that stock lately? It's become the last man standing in a business that now has a housing tailwind. It should never have gotten down where it was then. It had a decent balance sheet and decent cash flow and it is the place you can go to buy hard goods and have them be set up for you, which is not an easy thing to do these days.

My takeaway is that these big dives in retail are buyable once they settle. They come back and they come back with a vengeance because everyone's already turned on them.

I think that these will be the same. Why shouldn't we, for example, take Dick's at face value that the weather played havoc with their numbers. I think that's just a plain old fact and the company's being punished unnecessarily. Right now I see that Ross Stores has gotten absurdly hated. It 's still a regional-to-national story where it has so much room to grow.

Of course, everyone comes on TV and says they want to buy the drop. But when you get the dip, they are hated, until they rally back to where they were before they got crushed.

It seems that then and only then do people actually start doing some buying.

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