Key points
- Ross Stores shares have been among the best performers in the entire retail sector.
- With earnings expected next week, the stock continues to rise to new highs.
- All signs point to this rally continuing, but it is not without risk.
- 5 stocks we like best from Nordstrom
While our readers may be accustomed to hearing about how hot tech stocks are trading at all-time highs again, few stocks in more traditional sectors are doing the same thing. Take retail for example; Ralph Lauren Co. NYSE:RL is performing very well but has yet to surpass its 2013 record, while shares of the Central American favorite Nordstrom, Inc New York Stock Exchange: JWN are currently trading at 1998 levels.
However, over the past decade, one retailer has shone above almost all others and managed to outperform its competitors during boom and bust times. Ross Stores, Inc. NASDAQ: ROSTthe discount retailer, was among the first stocks to start recovering after the 2022 crash. Since July of that year, they have tacked up nearly 120% and have set new all-time highs since last December.
With them continuing to ramp up in power, you’d be forgiven for wondering if perhaps you’ve missed the boat and most of the good gains are gone. Fear not, however, and remember that when a stock is at an all-time high, it is much more likely to continue setting more all-time highs than not.
Bullish comments
This was something the UBS team captured last week when it raised its rating on Ross Stores ahead of the company’s earnings report, due next week. They are looking to Ross to provide a solid response to analyst expectations and provide bullish guidance for the year ahead.
It’s a bold step to upgrade stocks ahead of their earnings, as results tend to be viewed in a rather binary fashion; either they were very good and the stock recovered, or they were not very good and the stock fell. However, looking at the current momentum of Ross’ stock, you have to think they’re on to something. Even with the benchmark S&P 500 cooling slightly this week from last Friday’s record, Ross shares closed at a record high on Tuesday and were on track to do the same on Wednesday.
Sometimes, you simply shouldn’t fight the trend, and based on Ross’ track record of delivering great returns, this is one of those times. MarketBeat rated them as Moderate Buys, aided no doubt by the bullish stance the Evercore team also took last week. They reiterated their Outperform rating on Ross shares, while raising their price target to $165. Considering the shares are currently trading at record highs of $150, this is an incredibly bullish position to take and bodes well for those of us thinking about getting involved.
Getting involved
At the same time, the opportunity here requires caution and strategic thinking, and if you are just starting to build a position now, it might be an idea not to go all-in the week before earnings. This is a move that can pay off, as seen with NVIDIA Corp NASDAQ:NVDA last week, but your risk tolerance has to be almost insatiable to do so, and it’s unlikely to be a winning long-term strategy. The Ross Relative Strength Index (RSI) is at 77, indicating overbought conditions, and a red to extremely oval ratio will be needed next week to justify all the recent gains.
One strategy could be to start picking up some Ross shares as they hit new highs and look for more opportunities after earnings. If they are great and the stock recovers, you can increase your position with even more confidence in the stock’s potential, while if they are weaker than expected and the stock falls, you can lower your average cost into what will still be a great company to own .
Before you consider Nordstrom, you’ll want to hear it.
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