Abercrombie&Fitch

As you know, I prefer to focus my attention (and monies) on the market's leaders. One sector that leads the market are the chicken cyclicals (as discussed here during March and April); among several, one group that leads this sector today are the retailers.

Abercrombie&Fitch/ANF is among the leaders in the retailing group. ANF is a specialty retailer that operates stores selling casual apparel, such as woven and knit shirts, denim, graphic t-shirts, shorts, personal care and other accessories for men, women and kids under the Abercrombie & Fitch, abercrombie, Hollister, and RUEHL brands.

IBD's Stock Checkup Analysis (see graphic below) ranks Abercrombie & Fitch/ANF with an overall rating of A+, which is in the 99th percentile of all stocks in the Investor's Business Daily database. The overall rating is calculated using five proprietary ratings that measure each stock's Technical and Fundamental qualities and the Technical and Fundamental qualities of the industry group that it resides in, as well as a rating on the stock's current price attractiveness.

Abercrombie & Fitch/ANF receives a Technical Rating of 97, which places it 7th out of 62 stocks in the Retail-Clothing/Shoe group.

Abercrombie & Fitch/ANF receives a Fundamental Rating of 97, which places it 5th out of 62 stocks in the Retail-Clothing/Shoe group.

Abercrombie & Fitch/ANF receives an Attractiveness Rating of 98, placing it 4th out of 62 stocks in its group.

The Retail-Clothing/Shoe group's technical rating of A ranks it in the 96th percentile of the 197 different Investor's Business Daily Industry Groups. The Retail-Clothing/Shoe group's fundamental rating is C, ranking it in the 62nd percentile of all groups.

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The chart below shows all trading for ANF since its IPO -- and the breakout from the massive 6 year base (January 1999 - January 2005). ANF shares, subsequent to that breakout, consolidated those gains.

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Let's zoom in for a closer look...

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After its big base breakout at ~$51, ANF shares reached a high of $60 but mostly traded sideways in an intermediate term base between $60 and $51. This action served to confirm the axiom, "Once resistance, now support". Purchases made as close to the low-$50's represent a low risk entry, akin to purchasing a growth stock at value prices (Hmm, how can I make a statement like that...?) -- even though those prices are close to all time highs!

Volume is a critical component of discerning which stocks are market leaders; the average daily volume for ANF amounts to ~1,800,000 shares traded/day. This heartens me, as it indicates sufficient liquidity to interest institutions, and act as a sponge for their investable assets when they decide to make a full-on group or sector bet.

Approximately two weeks ago (Thursday, 2 June) the company reported net sales of $159.0 million for the four-week period ended May 28, 2005, a 43% increase over last year's net sales of $111.5 million for the four-week period ended May 29, 2004. May comparable store sales increased 29% over the same period last year. Year-to-date, the Company reported a net sales increase of 35% to $705.8 million from $523.4 million last year. Comparable store sales increased 21% for the year-to-date period. These numbers, released before the markets opened for trading that day, caught the market (literally) short-handed, and thus proved galvanic, providing the necessary thrust for ANF shares to break free of its 4 month base, and reach new all time highs.

This most recent breakout also serves to change the dynamics for ANF shares: they now are in gear to trend higher during the coming weeks and months. Throughout this trend to higher prices will be periods of consolidation, which should take the form of common area patterns -- such as the flag it now builds.

While seeking the opportunity to purchase additional lots closer to $60 (unlikely; more likely is ~$65), I already am long, with an intermediate term objective of ~$100.