TJX Companies (TJX): A good long-term core holding

By J. Royden Ward, Editor of Cabot Benjamin Graham Value Letter

From Cabot Wealth Advisory 6/28/10 Sign up for free Cabot Wealth Advisory e-newsletter

One of the most attractive very high-quality companies in my database of 1000 stocks is TJX Companies. The company is well qualified to be included as a long-term core holding in your portfolio.

TJX Companies (TJX) is the largest U.S. retailer of discount apparel and home fashion goods with 2,700 stores in the U.S., Canada, Germany, Ireland and the United Kingdom. The company’s main chains are T.J. Maxx, Marshalls, Winners and HomeGoods.

Management believes the slow economic environment offers outstanding opportunities for growth. TJX opened more stores than originally planned in 2009 and renovated many of its existing stores. These moves attracted many new customers who were drawn to low prices and good-quality merchandise. We expect TJX to retain its newfound customers and expand its store base aggressively during the next couple of years.

Same store sales increased 4% in April and May 2010. TJX shares are undervalued at 12.9 times forward 12-month EPS. Sales and EPS will likely increase by a minimum of 8% and 10% respectively during the next 12 months and accelerate thereafter as new stores become more profitable.

TJX increased its dividend at the end of 2009 and has raised its dividend by 22% per year during the past 10 years. The dividend provides a 1.3% annual yield. The company has a strong balance sheet with a reasonable amount of debt and lots of cash. Sales, earnings and dividends have been growing steadily for the past 14 years. I recommend TJX as a buy now.

Editor’s Note: Cabot Benjamin Graham Value Letter, of which Roy is the editor, has more on TJX Companies (TJX), as well as dozens of other top-rated value stocks. Don’t miss out on those stocks and Roy’s latest recommendations. Get started today! Click here: Cabot Benjamin Graham Value Letter

Roy Ward
J. Royden Ward

Editor of Cabot Benjamin Graham Value Letter
A lifelong investment professional, J. Royden Ward applies his 40 years of investment research, portfolio management, writing and publishing experience to his role as analyst and editor of Cabot Benjamin Graham Value Letter, which is directed to long-term investors seeking a guide to profitable value investing based on the time-tested systems originally developed by Benjamin Graham, the Father of Value Investing. A second-generation disciple of Benjamin Graham, Roy in 1969 pioneered the development of a computerized model that applied the formulas developed by Graham using a unique ranking system. Today, Roy applies his system to two models in the Value Letter.