Barking Up The Right Tree With PETCO Animal Supplies (PETC)

Now I know that the retail stocks have been hit hard with rising oil and gas prices. Yeah, I know, traders are dumping retail stocks left and right. Look at Wet Seal for instance. Ouch, right? What about when you see the company insiders bailing out of retail. Then you know that the upcoming quarter results will be horrible from this summers gas rise. Even back to school shopping can't save it. But what about our pets. Our wonderful dogs, cats, ferrets, fish and all the other creatures that we love and take care of need the items sold in a pet store. They need food and other hygiene products, regardless of what price oil hits. Of course, pet stores are retail stores as well and not all retail stores are created equal. I am going to say, ignore the retail- pet stores that have insider selling. Instead, concentrate on ONE that despite a big drop in price, rising oil costs, etc, still has company insiders buying lots and lots of shares. Which company is that, you may ask? Petco Animal Supplies (PETC) of course!

PETCO Animal Supplies (PETC) 6 month chart

Ouch! I know, its a Huge drop! But nonetheless, it is one that's WAY overdone. And actually, the company insiders agree with me. That is why, starting 8/30/2005 and even up to 9/1/2005(that's right, just a few days ago), insiders bought some stock. How much you may ask? How about 1,817,800 shares. That's right, close to 2 million shares! That is at a price of $21.89 a share (average). That's not far off from the price it closed at today ---- $23.00! What's the point? the point is, Insiders believe company has bottomed for the time being and so, they are loading up to take advantage of the upward movement this stock will be soon experiencing. And you should too!

Approach: If you want, grab it at the LOD (low of the day). I would accumulate shares. For instance, you may buy 150 shares at 23.01 one day. The next day the stock dips a little lower on light volume to 22.76. This gives you the opportunity to buy some more shares that you may have been planning on buying when it was at 23, for a lower price. Some may shun at this technique as being a great way to lose money (averaging down?), but I can assure you that the signs are bullish enough to not warrant a drop further past $20.51.

Time Frame: I like to classify the PETC pick as a Trade. I would trade it for at least 6 months to a year. Maybe longer depending on how it shapes up in the months to come.

Target: My first target is $28.10. 2nd target is $34.12