A lot has already been said about Target's troubles these last few months concerning their security breach along with its potential and probable affect on revenues and earnings. On 22 Dec 2013 I wrote an article titled "Walmart, Target and Family Dollar" in which I discussed many of these problems affecting Target. The troubles with their Canadian stores have also been well documented and discussed on the various financial websites. In fact there's an excellent article published on TheDIV-Net about Target titled "Why Do I Keep Adding To Target" which discusses all of these problems and is well worth reading. In response I think Target has done a pretty good job working with banks and credit card companies attempting to insulate their customers against fraud by offering free credit monitoring and identity theft protection as well as new credit cards with built in microchip technology to replace the magnetic strips. I also think that Target will eventually solve their Canadian problems and their customer base will once again return and support the store because Target continues to offer value to their customers everyday.
"A man should look for what is, and not for what he thinks should be." |
Since I'm convinced that a company like Target, which is a member of the Dividend Aristocrats, is fundamentally sound and will continue to be so for many years to come, I only need to know if it's appropriate to buy the stock at its current price. For me, that means viewing the price chart and trying to discover what it's trying to tell me. I want to know what the reality of the stock's price chart is saying and not what I think it should be telling me. As anyone can see from the chart below it appears that the stock has bottomed out at $52.25 and is starting to head back up. It's also obvious that the RSI bottomed out during the first week of February and turned up. The MACD bottomed out during the first week of February and turned up crossing the signal line on approximately the 10th of February. It can also be seen that the ADX reversed directions during the first week of February. These things alone would tell the astute investor that the stock had turned the corner and the preponderance of investors were pushing the stock up rather than down.
Yesterday saw a nice increase in the stock price on nice volume pushing the stock price above the 20 day moving average and adding even more confirmation that the stock is moving up. The only thing to notice at this point is that the stock will probably find resistance as it tries to move through $61.00. For a trader this is important information but for a dividend growth investor, all that is needed to know is that this stock is on sale and that this is about as cheap as the price is going to get.
What all this means to me is that I missed the short term bottom on this stock but also that it's not too late to get in even at this slightly elevated price. I don't ever want to get into a stock on its way down and it's difficult, if not impossible, to know where the bottom is until after the stock has actually bottomed out and started heading back up. Unfortunately I missed the bottom but not by much and luckily I'm not too late to take advantage of this "sale" on the price of this security. This is exactly what I intend to do. I'll be looking to enter this stock today or tomorrow (Friday) with the intent of gaining a foothold in a very good company at a very good price. That's the purpose of technical analysis and that's what value investing is all about.
Yesterday saw a nice increase in the stock price on nice volume pushing the stock price above the 20 day moving average and adding even more confirmation that the stock is moving up. The only thing to notice at this point is that the stock will probably find resistance as it tries to move through $61.00. For a trader this is important information but for a dividend growth investor, all that is needed to know is that this stock is on sale and that this is about as cheap as the price is going to get.
What all this means to me is that I missed the short term bottom on this stock but also that it's not too late to get in even at this slightly elevated price. I don't ever want to get into a stock on its way down and it's difficult, if not impossible, to know where the bottom is until after the stock has actually bottomed out and started heading back up. Unfortunately I missed the bottom but not by much and luckily I'm not too late to take advantage of this "sale" on the price of this security. This is exactly what I intend to do. I'll be looking to enter this stock today or tomorrow (Friday) with the intent of gaining a foothold in a very good company at a very good price. That's the purpose of technical analysis and that's what value investing is all about.
 Target (TGT) Daily Chart |
Update
02/21/2014
Yesterday and today were excellent entry points into this stock. Dividend yield is just slightly over 3.00% the P/E ratio is just over 15, the price per dividend ratio is just over 32, and the payout ratio is sitting at 46%. In addition to all of this, weekly options are offered on this stock and they are being priced such that premiums of around 1% can be captured for selling a one week covered call. At this price this stock offers both future capital gains as well as an enormous opportunity to enhance that 3% dividend with multiple times that yield from selling covered call options.
02/21/2014
Yesterday and today were excellent entry points into this stock. Dividend yield is just slightly over 3.00% the P/E ratio is just over 15, the price per dividend ratio is just over 32, and the payout ratio is sitting at 46%. In addition to all of this, weekly options are offered on this stock and they are being priced such that premiums of around 1% can be captured for selling a one week covered call. At this price this stock offers both future capital gains as well as an enormous opportunity to enhance that 3% dividend with multiple times that yield from selling covered call options.
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