Gathering New Information about Stocks, Health, and Sports

          Until this morning (November 3, 2006) I believed that much of the retail industry was overbought, and that any capital gains accumulated during the industry’s incredible run should be taken off the market into other areas. However, after seeing that the unemployment level of 4.4% is the lowest amount in over five years, I foresee a tremendous opportunity for a department retailer such as J C Penney (JCP) to go even higher in terms of share price, even as it has recently reached record highs.
          Such analysis can be made for a myriad of reasons. Many investors have seemed to realize that certain components of the retail industry have outperformed other areas. While through the early 2000s, many discount retailers earned better fundamentals in terms of revenue and earnings, from analyst understandings, it seems that the market concentration of valued stocks has shifted from such discount stores of Wal-Mart and Costco to more departmental companies such as J C Penney. With this Plano, Texas located company to produce its quarterly results next Thursday (November 9, 2006), there is a strong possibility, if the other stocks are any indication that shares of J C Penney will be favorable to the shareholder and sustain such optimism for at least the next six months.
          Referring back to the introduction, I stated the unemployment landmark for a number of reasons. As I originally believed that the economy was slowing down in a more dramatic fashion than appears to be, such analysis would contribute to the assessment of a poor share price in the future for retailers such as J C Penney. However, as more people are obtaining jobs, and as more wages continue to rise coupled with a terrible savings rate for domestic consumers, there is a good possibility that a company such as J C Penney can benefit immensely from such readings. As more consumers have more discretionary income to spend, rather than going to discount stores such as Wal-Mart to purchase normal goods, these same consumers, especially during the holiday season, will tend to switch their purchases to more luxury goods found in departmental stores. As that happens, the fundamentals for J C Penney should sky rocket as both the fact that Americans have more money and the fact that the time has come for holiday shopping, for the next two quarters, at very least, J C Penney should support the necessary numbers to boost the share price of this stock to even more record highs.
          As I say such a sentiment, there is also a hint of cautiousness involved too. As the Federal Reserve has indicated by its previous three meetings that they are more than likely completed raising rates, and the next move would be to decrease rates, such would not be too favorable for companies like J C Penney. In order for rates to be decreased there would have to be a significant pullback in the economy where the unemployment rate surpasses about 5.5-6%, and economic growth slows down to less than 1%. If such is the case, then consumers will be more hesitant to purchase products from departmental stores such as J C Penney and move their purchases to discount retailers, as what happened in the early 2000s. However, because of the lag indication, and also because there seems to still be a strong sense of economic growth illustrated by the revised unemployment rations, J C Penney, at least for the next six months should provide investors will a good opportunity to continue or even begin to earn more capital gains.
          Therefore, with pretty solid fundamentals, especially in recent years and quarters, J C Penney should not disappoint investors in the next couple of earning sessions. Provided, that this company has beat the bottom line figure every time in the last four quarters, I am expecting an even bigger positive surprise margin when the results pour in next week. Again, while J C Penney may not be completely suitable for a long term investor (even though it had only moved sideways during the last recession), in the short run there is pretty sure bet that the share price will rise dramatically.

-Dennis Biray
November 3rd, 2006