Every now and again a stock gets so cheap that you have to scratch your head. I realize that there are two sides to every trade, and for every buyer there is a willing seller, but who was selling shares of Canadian clothing retailer Reitmans Ltd. (RET.A) today around $15.50? I don't believe Reitmans is going out of business, yet it seems the market is holding a 'going out of business sale' on the stock. Unless someone out there knows something that I don't know, which I hope is not possible, then in my opinion this is absurd.
My view on Reitmans here.
The price the market was asking for shares of Reitmans today was too attractive to pass up. I gobbled some up at $15.57. At this price they were trading under 11x earnings and yielding over 4.6%. For a company with return on equity and assets north of 18%, no debt, and a solid history of earnings and dividend growth this is the utter definition of cheap. My discounted cash flow model indicates that at $15.50 the market is pricing 3 - 4% earnings growth for the next 10 years from Reitmans. It felt good to add those new dividends into my annual income from investments flow. I'm always a sucker for a good sale, especially one that pays fat dividends.
With this purchase Reitmans now makes up about 6% of my portfolio. I'm now 15% weighted in consumer products.