The firm’s broad reach and off-price retailing formula encourage plenty of regular visits from loyal customers, providing resiliency even if the economy dips. That probably explains why the share price has held up well with a 17.9% gain compared to a decline of 8.2% in the S&P500 over the last 12 months.
We don’t feel that recent insider stock sales represent a negative for the company.
Meanwhile, the stock trades at 21.6 times the company’s 2023 earnings forecast.
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THE TJX COMPANIES (Symbol TJX on New York) is a leading off-price retailer of clothing, accessories and home fashions. Off-price retailers purchase merchandise at below-wholesale prices and charge less than retail prices.
Through their shares, investors tap a network of stores. In the U.S., TJX operates 1,290 T.J. Maxx locations, 1,157 Marshalls, 862 HomeGoods, 62 Sierra Trading Post outlets and 40 HomeSense locations. In Canada, it has 295 Winners outlets, 150 HomeSense locations and 106 Marshalls stores. TJX also operates in Europe, with 626 TK Maxx and 77 Homesense stores; and in Australia, with 71 TK Maxx outlets.
Some investors might be concerned that in November 2022, some TJX executives and board members sold large amounts of shares:
For example, executive chair Carol Meyrowitz sold 16,223 shares at $79.79 each for a total of $1.3 million. She still holds 209,390 shares. Executive vice president Louise Greenlees sold 6,708 shares at $79.99 each for a total of $536,572. She still holds 51,627 shares.
Growth Stocks: Outlook and formula remains positive despite challenges
However, we think it’s a mistake to put too much weight on insider trading, since insiders can delude themselves about their company just as easily as outsiders. However, it pays to remember that insiders may sell for a variety of personal reasons that have nothing to do with the company. On the other hand, insiders only make substantial buys for one reason—they think the company has investment appeal. So, insider buying is a more powerful indicator than insider selling.
We think that you need to look at insider selling (and buying) on a case-by-case basis. It’s just one of many factors worth considering.
Meanwhile, although it faces challenges, TJX’s outlook is very positive for investors.
Apart from inflation hurting consumer confidence, like most retailers, TJX faces challenges from labour shortages and rising freight costs. Meantime, rather than shifting online in a major way, the company will stick with its successful formula. To find attractive deals for its customers, it depends heavily on the skills of its merchandise buyers, many of whom have been with the company for decades. TJX stores then quickly turns over limited quantities of products—all sold at bargain prices.
The result is an ongoing treasure hunt that spurs regular store visits and encourages consumers to buy immediately rather than risk someone else snatching up a deal. Once the retail landscape regains an even more normal footing, TJX’s winning formula will continue to be a big plus for both its customers and its investors.
The shares currently yield 1.5% and trade at 21.6 times forecast earnings, a reasonable valuation in light of the company’s established business model and regular growth.
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Pat: 1.5% yield is way too low and 21.6x forecast earnings is over 20 which used to be the high mark for stocks but you are on the mark with insiders sells and buy’s. A lot of the time you will see were an insider received so many options and sold the shares for that price making a profit. I remember once Ron Southern of CU bought so many shares of the company and we thought if he had faith in his company then we should too so we bought some shares in CU at $19 1/8. It has turned out well.
Great insights here. We think that you need to look at insider selling on a case-by-case basis. It’s just one of many factors worth considering. Thanks again.