Another great business on sale

Do you wear Polo shirts? Chances are that you do. Polo is one of the most recognized brands in the world and a lot of people love it. The manufacturer for the Polo brand is  Ralph Lauren Corporation (RL). RL designs, markets and sells luxury men's, women's and children's apparel, accessories, fragrances and home furnishings to customers worldwide, and has dozens of boutiques in the United States and other international locations in London, Milan, Tokyo, Paris and Moscow. This is a very successful fashion business with products loved by people all over the world. But it cannot be immune to the sluggish retail sales as for others lately.  Here is the headline news on Tuesday: Shares of Ralph Lauren Corporation (RL) are getting punished Tuesday, falling more than 10% to $25.35 after the fashion retailer announced that revenue will likely decline by low double digit percentage points this year on plans to close under-performing stores. But I think this was way overdone and offers a great opportunity who wants to own part of this great company. Fundamentally RL is cheap at a forward PE of 13 and EV/EBITDA at 7. It has paid out increasing dividends since 2003 with an annual compounding dividend growth rate over 10% since then. You don’t see a bad company that can consistently increase dividends for so long. But I’m more encouraged by its technical strength. It has a strong  support around $84. And its Tue price action has further demonstrated a text book style of a bottoming: it plunged to about $85 at opening but quickly recovered all the way back to above $90. This was a very strong price action in facing very bad news. Anyone who dared to buy it below $90 should be really happy as we are talking about over 5% immediate gain over just a few days. But I think it has more upside potential moving forward. Today is another demonstration why RL is quite bullish technically: when the overall market is under heavy selling with nearly a 20% jump of the volatility, not much downside move for RL today. I will hold RL as long as possible until I see a technical bearish sign showing up. For now, I only see a strong upward trend for it.