Gathering New Information about Stocks, Health, and Sports

         To often investors are faced with the dilemma of picking out certain companies based on fundamental and technical analysis. For the case of Liz Claiborne (LIZ), the situation is no different. It is true the Christmas and holiday season is upon us, and many companies such as Liz are trying to accrue more profit than other times of the year. However, as you will find out, there are some benefits to purchasing shares of this company now, but there are also some risks involved to produce a complicated situation.

         Fundamentals are one area where Claiborne excels. Revenue has been growing at a fairly strong rate over the past two years, which, coupled with increasing operating margins and gross profit margins over the same duration make for a very compelling case. In terms of producing cash, Claiborne continues to grow on a year to year basis, illustrating that this company still has the methods necessary to utilize economies of scale. One of the few areas that do concern me is the loss, percentage wise, in cash from 2005 to 2006 relative to operating income. Although such decrease may be examined and exclaimed as marginal, I always feel such a statistic is an important one for a company. Relative to the balance sheet, it is true that Claiborne has been decreasing many of its current assets, but, for the long term, Claiborne still has higher total assets while reducing many of its liabilities. The best statistic relative to Claiborne however can be seen from its P/E ratio. Much smaller than competitors such as Quicksilver or Bennetton, Claiborne also, according to Yahoo Finance will support a forward P/E of less than 13 in the near future which is an excellent indicator to see how a company fares against its rivals. As a result of the good news relative to fundamentals, Claiborne looks like a terrific buy from an investment standpoint.

         However, as there is much glee in terms of the numbers, there are few concerns with regards to technical analysis which leads for my conclusion of a risky purchase. Over the past five years, Claiborne has grown, in terms of share price, over 60%. While many investors may exclaim what is the matter with such solid growth, in the last two years, Claiborne has only remained unchanged which brings my concern up. Unfortunately for many investors already holding shares of this company there seems to be a situation where this company has been trapped in a resistance and support level range. With a support level of about 34 and a resistance level about 10 points higher, as an investor I would not take a chance, regardless of the fundamentals to put my money in for the long term. However, as many technical, short term investors may find appealing, with such a range, it may be possible for an investor to purchase shares at the 34 share price mark and then sell a large portion by the time the share price rises back to 43 or so. Doing so is risky as technical analysis is not always reliable, but if such a trend continues over the next couple of months, there is a chance, especially with the Christmas expectations that I am bullish about, for this company to produce favorable gains to its investors. However, as the price of the stock is near 43, its resistance level, I would be hesitant purchasing shares until the price drops below 40 or goes to about 45 which would signal a strong rally from this company. Either way, the key is to wait for one of these signals to appear before purchasing any shares, and then to take the appropriate measure relative to which way the share price goes.

         Thus, while the fundamentals may be indicative of a strong company ready to appease shareholders, the technical side makes it tough for me to label this company as a strong buy: especially at its current share price. However, like mentioned prior, the key for this company is to wait for a few weeks to a month and examine if it reaches the 40 or 45 share price range. If the former, wait a few more weeks or months until the price reaches 35 to purchase more shares, but if the latter, purchase a good quantity of new shares, because with the strong fundamentals, this stock could be ready to rally.

-Dennis Biray
December 3rd, 2006