BIG Decision: Is BigLots a Buy or Sell?

Watching capitalism in all its states is fascinating. We have up markets, down markets and everything in between. No matter where we are at in the cycle we can always learn something.

It really is a neat thing if you are an observer and student of the game. Of course we are more than just casual observers. We are the investors fighting to beat the market and the machinations thereof matter.

During this current economic downturn we are seeing some extraordinary events. One interesting aspect I am seeing is the retail sector. Stores that depend on the consumer are getting absolutely crushed.

As such our entire retail sector must adapt or face extinction. The adaptation of choice is discounting and not just ordinary discounting, but cut-throat discounting.

Choosing slimmer profit margins seems like an easy choice when the alternative is failure. Those that have focused on discounts have not just survived, but some have thrived.

Close out retailer Big Lots, Inc. (BIG) has been a huge winner in this environment. Sales and profits at it stores have been reacting inverse to what others are seeing and as a result its stock has been a star in this downtrodden market.

Shares of BIG have darn near doubled in value in 2008. That is simply amazing performance considering where we have one of the worst markets in terms of performance in a long time.

Obviously the formula at BIG has been a big winner. The question going forward is can they continue to impress.

Get my opinion on BigLots and find out what two of our top bloggers things when you read this week's Bull/Bear Report.

Recently, shares took a beating as investors locked in profits. That they did so after BIG announced that they beat guidance in the most recent quarter is quite telling. Good news is bad news I guess.

So here we are today with BIG 10% off its highs. Is it time to buy or time to sell? Here are your thoughts:

Bull Case - jmcdowell

Big Lots has a knack for upside surprises but its stock (BIG) demonstrates resistance near 34 as shown on a six-month chart. The 34 resistance point is evidenced on a three-year chart as well and perhaps motivated many traders to take profits upon its latest earnings announcement. BIG also exhibits support near 27 - an approximate 10% further decline from its current price. If it successfully tests 27, BIG will be a particularly tempting buy. A repeated run-up to 34 would net a 25% gain. Continued good results coupled with markets warming to retail stocks could very well propel BIG beyond 34.

Bear Case - Jim Van Meerten

BIG is trading below its 20/50 &100 day moving averages. Right now it's 15.22% off it's high and has traded down the last 2 week.

If you're looking for a bargain in the bargain stores look at 99C Only Stores (NDN). It is trading above it's 20/50/100 day moving average, made 7 new highs in the last 20 days and is trading within 1.38% of its recent high.

Get on board with a stop loss at 7 and I think in 3 months you will agree you got a bargain.

Given that I expect the economy to recover, I think the pressure to find discounts alleviates. The news is all good at BIG for the moment, but I do not think it is sustainable.

With a huge rise in the stock this year, taking profits in BIG is a wise choice in my opinion.

Jamie Dlugosch
Executive Editor, InvestorPlaceBlogs

by The Freshman |  09/05/08  |  Stocks: BL, NDN,