Tech time
Long

Undervalued with good upside

NASDAQ:TFM   FRESH MKT INC
293 33 4
TFM             is classified as a growth company that has consistently expanded revenues YoY with no signs of slowing down. Comps remain positive. If the company continues to grow at the current rate, they should trade at 30-40x. They are valued less than 20x expected earnings right now - fair value should be within the range of $45-50. And $50+ in an optimistic scenario.

A comparative example would be Whole Foods ( WFM             ), they have limited growth yet trade at 30x and 25x expected; much higher than TFM             . Overall I think downside risk is limited from here since poor weather conditions have been baked into the last two quarters (causing a severe sell-off). Although the broader market could generate additional volatility , making shares even cheaper.

The only reason I am not creating a massive position is because the technical outlook remains relatively weak. Moving averages and candlestick formations are bearish . However with a margin of safety larger than 25% it looks attractive. Not to mention that institutional ownership is high (a positive factor).

If it continues to fall I will add to my position of 100k in increments of 4% or so (about $31.25 would be my next average down price).
IN THE CHART: the blue circles represent a major price discrepancy. If the next few quarters beat expectations, the share price will easily rise to levels seen a several months ago. I am currently buying shares at $32.55-32.60 (2:53 pm), you can join me if you'd like :)

Thanks for reading. Share your thoughts and comments!
Hey tech, thanks for the recommendation. I bought a few hundred shares near the close today. PBR and CHL were great picks, I don't expect much different for this one haha
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Agreed techtime, I one-uped your stake. Bought 500k after-hours.
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Thanks for the comments guys. I'd like to see it move lower to $30 or so (and have about 500k-1 million worth of exposure).
But this might be a price floor. I'll let you guys know what I do.
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Thanks for bringing this company to my attention again. I was researching TheFreshMarket a couple months ago when analysts downgraded them, dropping the share price about 8%. And what you say does make sense. You are almost buying a growth company trading at the value of a well-established, boring cash-cow. Some of these beginning grocers/retailers go for 35-50x. Imagine if this continued to sell off? Buying at $30 would be a steal, any lower you might as well bet the house. Unless we see a SERIOUS issue with revenue growth or same store sales you should buy. I think i'll open a position next week, hopefully more people dump their shares.
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You're maybe right, and I hope you are if you own a bunch of shares, but nothing shows in the chart (yet) that the price won't go much lower.
The price tried to break the $36 a couple of times in March but did not make it, I'll wait clear bullish signs before entering long on TFM.
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Tech time algoview
Hi algoview, thanks for commenting. Revenues and EPS came in under expectations (in the last quarter) yet shareholders didn't seem to react much to the negative news.The reason is that the inclement weather was expected to adversely effect them, hence we saw almost no volatility in either direction (that's my point of view).
I just started creating a position today, and want the price to move lower before it heads higher/closer to fair value. Every % that it drops, the larger my margin of safety unless the underlying business is under-performing. Other managers confirmed there is a bare minimum MoS of 10-15%. However they typically do not participate in "growth" stories. But obviously the potential is much greater than the market currently recognizes.

In terms of technicals, using Vortex and MACD, the price looks like it could head down another 5-15% - and that's what i'm hoping for. Stochastics looks pretty oversold. Time will tell.
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Thank you for sharing! This chart pattern reminds me of a whip. The way it circles and snaps down to a point. Really nice find! I too wish you well. Support looks thin from here to your target. Price may find itself there soon. Thanks!




snapshot
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Tech time littleriver
No problem littleriver, appreciate the kind words. Like I said, I want the price to fall at least a little more to increase my exposure. I can't bend my rules of allocating too much capital at one price level.

And thanks for that chart. There is no definitive bottom here, but keep an eye on those moving averages. It could break above the 50dma soon, perhaps a month or so. The 20dma is already doing that (a minor golden cross). So there are bullish patterns forming despite it's on the lower end of the 52w range.

Good luck.
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Hey guys, I would NOT be a buyer here.
I took a little off the table with TFM on my 200k position --- 12.8% is a pretty quick run-up, so we might see a small reversion to the mean (with the moving averages). I think it's likely due to the heavy selling levels exhibited in the prints at 36.60-36.75 and the frothy trading. It's just high frequency here.

Good luck everyone.
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MACD is bullish so I think it could have another green day but you're right. You'd only be chasing this thing in the short term, stochastics is extremely overbought and starting to roll over. Were likely to see $36 before $37 if momentum dies out, which it should. There's also a bearish divergence on indicators.
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Just started dumping some of my position on that huge spike up over $36.80. The prints are getting messy here.
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Trading prints are looking better here...much less selling pressure at this level. Entered half a position at $35.45
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Not overly bullish right here, momentum is still negative and indexes could pull it down further. But depending on who you ask it's subject to interpretation...there are many overvalued companies within the NASDAQ (TFM is in this index), however THIS business is obviously undervalued. Ask a value guy and your fine...beta/correlation, you have the converse. Therefore this will be a bumpy ride before we hit $40+. I'm just holding a core position, and moving 25% of it in and out on the volatility spikes.
The 1.2 million insider purchases just reinforce the fundamental idea though. I put a little money back on the table after-hours.
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TFM is also sitting in a weekly bullish bat pattern, so don't expect massive gains overnight. But they will come.
X = August 2011 $31 --- A = September 2012 $62 ---- B = March 2013 $39 ---- C = August 2013 $57 ---- D = February 2014 $32

Target is E = $50+
Looking to add on any major sell-off. Good luck all.
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Broceatter Tech time
Walmart recently made comments that they are going to become more aggressive in the organic food space. Does this concern you? I took an initial position in TFM today at 34.90.
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Tech time Broceatter
Hey Broceatter. The broader market showed a little concern but there are few things to consider.
Consumers that go to TGT and WMT rarely purchase organic foods because of the price margin. There are also people that simply tend to stay within "higher end" retailers to get quality food. Analysts from top investment firms echoed the idea that these giants will likely have no significant impact on traditional organic retailers.
WFM's CEO also discussed that the industry is still expected to grow at a rapid pace, the consensus is about 17%. TFM management is actually projecting higher revenue growth closer to 19%. I think new store openings and comps should give the company just that. TFM also adjusted store hours, adding 1 hour to the beginning and 1 to the end of each operating day (analysts believe that will generate 2% more in same-store-sales).

So no, not really. The news is blowing things out of proportion as usual. I think investors right now are really worried about the short term fluctuations of margins (i.e. net income) and seemingly heavy market saturation. Conversely, TFM has plenty of room to grow and their top line hasn't suffered.

One indicator that I follow is the relative price to sales ratio. Putting it into context....WFM is at $43, trading at $49 (six dollars over), versus TFM at about $56, trading only at $34.80 (under 21 dollars) that's a great situation to be in. The market is usually quick to react, it only takes a few quarters. It's guaranteed volatility will continue, so don't bet the house on a single price. Like I said before, I'd be happier to see it at $30 or $27 before $45 or $50.
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Broceatter Tech time
At what price will you add to your current position?
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Tech time Broceatter
I placed an initial position at $32.60, took some off at 36.70 (20% of it), readded a little at 35.10 (5%), and yesterday bought at 34.24 (5%). I'm just going to see how each trading week plays out. To me it looks like it's bottoming, especially with insiders boosting sentiment. Grocers are defensive stocks by nature so theoretically it shouldn't be heavily influenced by market calamity. If they trade lower Monday I will add the last 10% of my initial position sub $34. A break below $33 I would introduce additional capital, adding to my starting position.
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Started layering in my last 10% here at $33.82.
Put 5% in so far, hopefully it tumbles a little more so I can put the other 5% in.
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Added a little more at $34.05

Not sure if anyone else see this but it's sitting in a bullish flag channel. This guy made it easy to see: http://charts.stocktwits.net/production/original_22137825.png?1397744433
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Ran some financial models over the past week, fair value is likely around $46-49. Hopefully it drops back below $34 or $33...but I picked up 6000 shares today at $35.78 because it just seems to resilient. Nice find..
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Even though NASDAQ price action is bullish, I just shaved off a little at $37.08 ---- Trading prints are yet again top heavy between $37.00 and $37.17 so i'm not sure if we will see a break-out here. Indicators look like they are starting to roll over. So I would recommend NOT buying at current levels, and simply maintain your core position instead.
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If anyone is still interested I will continue to make the buy and sell calls for trading the daily. But tell me, otherwise I no longer am.
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Broceatter Tech time
Yes, I have been following this.
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What a gift!! Shares down 3.5% after-hours!! Buy Buy Buy. I just bought several hundred. Adding on the way down.
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Yeah great price swing, I guess it was some fund dumping. That's the beauty of trading around a core position...you can have the mentality of both a "flick switch" trader and a patient investor.

The break above $37.10 was a head-fake, I knew the prints were messy up there lol. Anyways, adding some back on at $34.50 in after-hours but hopefully it heads lower. I'm still looking for larger net exposure.
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Added the rest of my previous position at $33.50
If it goes below $33/32 then I will start growing my total exposure over my initial.
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Hope you guys have thick skin. But this is a joke of a downgrade in my honest opinion.
Bought $150k at $31.50
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Hope you guys are buying at these levels, especially below $32. Don't go 100% but it's very safe here.
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Hi everyone. Been pretty busy as of late, increased my TFM position again today. Perhaps the market will break lower and I can finally get it below $30. But at that point it's almost turning into a steal. We'll see. Currently sitting on support.
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Adding more here, in addition to my initial investment, at $29.89
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Well I hope everyone averaged down. CC was good, revenue beat, eps in-line, and guidance looks good. Long term outlook remains strong and comps were decent as well. Competition appears not to be offsetting sales, but actually inflation instead!

Anyways, shares are up 11% after-hours, and I highly recommend not selling. There will be volatility so be prepared.
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Cup and handle forming here imo. Bulls intact.
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