Best Stocks to Buy for Around $5: Aeropostale (ARO)
Specialty retailer Aeropostale (ARO) certainly wouldn’t be categorized as a growth stock. The company has seen stagnant revenue for some time, and is currently operating in the red.
But after crashing over 60% in the last year, the collapse in ARO stock might now be a bit overdone. Sure, margins were pinched and sales have gone nowhere … but Aeropostale is on track to return to profitability this year as it closes about 50 stores in 2014 and might close more than a hundred more after that.
Furthermore, let’s not act like ARO is alone. Many teen retailers including Gap (GPS) and Abercrombie & Fitch (ANF) have been hit by a horrible group of negative pressures in the last few years that include:
- Weaker consumer spending thanks to the Great Recession
- Continued growth in e-commerce and declines in mall traffic
- Changing fashion tastes away from bigger brands, and big-time competition from smaller players
This undoubtedly has created challenges, but ARO is right-sized for the current environment and all the negativity has been priced in. Investors who buy this $5 stock now could see a big pop once the stock returns to profitability in a few quarters, and continued improvement on employment and spending data could bode well for retail sales across the board.
An added sweetener: There are rumors of an Aeropostale buyout by private equity to unlock value through cost cutting and restructuring. That certainly would come at a premium, perhaps at $7 or $8 a share, and result in a quick but substantial pop to any shareholders.