Sunday 9 August 2015

Stock bought August 2015: TJX

TJX, an American off-price retail company

This investment will be my second Peter Lynch investment that is purely based on the visual observation of customer behaviour. Here in Berlin I have visited two TK Maxx stores and both have been filled with customers that are not only looking around a little in the store but they also buy stuff and they buy a lot. The fascinating thing is that many of the customers are looking at the prices of the items in their smartphones / iPhones and still, after making the online price check, they pick up the item and place it in their basket.

Personally I would say that TJX is fully established in the North American market and they have plenty of growth in Europe where they have been for a couple of years and of course... in the rest of the world. Their initial market establishment in Europe was a failure. The reason for this was due to that they tried to sell American design brands when they should have sold European. Today they have built out their European connections and are getting the European design brands and this have lead to a massive interest from the European customers that are flocking the stores.

The P/E is however scary with above 22 and when I went back to look at my previous Peter Lynch investment which was ABF. I bought that at the insane P/E of 28 and that has worked out ok so my hope is that the same will apply here in this situation.

I have discovered a third Peter Lynch stock but the P/E of that company is above 50 and that I find today to be even a bit too strong for me for a growth investment.

Anyway... TJX has an established business model that have worked for years in North America and it will work also in Europe with the changes they have made. I see no direct competitors in the size and volumes that they are moving in. Sure there are off-price establishments for design brands but from my experience here in Europe these stores (often run by individuals and not large companies) are adding such a large margin on their sales that the customers in the end get only around a -25% reduction on the designer brands from last season. The discount must be larger and TJX offers this and it is often -50%. For a person wearing something more than one season then that reduction is excellent which is the reason for the customer filled stores.

I bought 32 shares and including fees my total investment was 2008.54 € and this then becomes 62.77 € per share. I expect this to become a long term investment and I am looking forward to see what the current CEO, Carol Meyrowitz, will manage to accomplish with TJX in the future. She says that she wants to bring TJX to 40 billion USD revenue and who am I to say that she will not accomplish this.

To find out more regarding TJX please visit analysis of TJX.

If you want to see my current Stock Portfolio then click on the link but the portfolio will not be fully updated until the end of the month. 

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