Today’s recommendation is from the latest Cabot Top Ten Trader, edited by Michael Cintolo.
“Francesca’s Holdings Corp. (FRAN, $34) was founded in 1999, but came public in July 2011. In the decade between its founding and its IPO, the company developed a unique marketing approach featuring small boutiques that sell fashion apparel, jewelry, accessories and gifts under the name Francesca’s Collections.
“The company’s target shopper is an upscale female in the 18- to 35-year-old range. Each store stocks a wide variety of goods, but only a limited number of each product, with new stuff added five days a week to encourage return visits. This strategy has grown the chain to over 340 boutiques in 43 states, and management sees the opportunity to reach 900 locations over the next five to seven years. Each location recoups its capital investment in well under a year, lowering capital requirements for expansion. With each store sporting a small footprint of around 1,350 square feet and generating $550 per square foot, the fundamentals are very sound for Francesca’s. Retail stocks have been doing well, and recent upgrades from analysts have pushed the stock to new highs.
Technical Analysis
“FRAN touched 34 back in March then tumbled hard to 21 in May. But support firmed up quickly and the stock put in a beautiful base under resistance at 32 from the middle of July until late last week. The pop up from 31 to 34 on Friday had good volume support and buyers are following through today. FRAN is soaring off a good base, and has a good head of momentum. You can either wait for a pause or pullback or just jump in with a small position right here. Suggested Buy Range: 33-35. Cabot’s buy range is valid for two weeks.”
- Michael Cintolo, Cabot Top Ten Trader, August 20, 2012