Coach/COH

One week ago (Tuesday, 7 June), I mentioned here that I was swapping an over-valued, Men's Wearhouse/MW for the comparably under-valued, Coach/COH. (I base this specific notion of valuation solely on share momentum.) Good thing, too, as MW begins to slacken its pace of gain (in fact, turning down) whereas COH gathers a head of upside steam.

Coach/COH is a designer, producer and marketer of modern American classic accessories, handbags, women's and men's small leather goods, business cases, weekend and travel accessories, outerwear and related accessories. Together with its licensing partners, Coach also offers watches, footwear, eyewear and office furniture with the Coach brand name. Coach's products are sold through a number of direct to consumer channels. That is, when I identified three months ago the chicken cyclicals as leading sectors, the retailers as a group were themselves led by the specialty retailers. Consider the earlier recommendations: AEOS, BEBE, JOSB, MW, TBL, URBN, etc -- each upside leaders by blowout proportions. Coach/COH is part of the same leading group, and in fact one of its leaders. And you know how I feel about the market's leaders!

IBD's Stock Checkup Analysis (see graphic below) shows Coach/COH with an overall rating of A, which is in the 95th 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.

Coach/COH receives a Technical Rating of 88, which places it 9th out of 48 stocks in the Apparel-Clothing Mfg group.

Coach/COH receives a Fundamental Rating of 97, which places it 1st out of 48 stocks in the Apparel-Clothing Mfg group.

Coach/COH receives an Attractiveness Rating of 92, placing it 6th out of 48 stocks in its group.

The Apparel-Clothing Mfg group's technical rating of C ranks it in the 66th percentile of the 197 different Investor's Business Daily Industry Groups. The Apparel-Clothing Mfg group's fundamental rating is D+, ranking it in the 53rd percentile of all groups. (Low, but rising quickly! -- dmg)

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The chart since its IPO (weekly bars):

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Looks good, eh? Of course, some (including me) might argue it appears already to have discounted the good news... until he or she gazes upon the daily chart:

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Note that Coach/COH shares build one intermediate term base after another (two such bases are shown in the chart above) -- this has the effect of restraining the traders' animal spirits and not allowing for an excessive valuation, either fundamentally (a 6 month base typically includes two quarters of earnings reports; in the case of Coach, excellent earnings!), or measured by share momentum. I always have said that a stock has its own life cycle, many times distinct from what occurs at the parent company. For Coach and COH, to date the two rise in tandem.

As you know, I already am long one lot (at a correct $31.75; I mis-spoke earlier), and hope to purchase a second lot as it probes former resistance at $30. As occurred yesterday with ANF, such an opportunity appears increasingly unlikely. My intermediate term objective is the low-$50s. We shall see.