This Amazon-Resistant Retail IPO Keeps Climbing, May Break Out Again – Investor's Business Daily

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In February 2016, the IBD Stock Analysis asked if new IPO Ollie’s Bargain Outlet (OLLI) would prove to be a long-term bargain for investors. After a 103% run, it turns out the answer was yes.

XAutoplay: On | Off From apparel retailers like Macy’s (M) and Kohl’s (KSS) to grocery store chain Kroger (KR), Amazon (AMZN) has put the fear of Jeff Bezos into many players across the retail sector.

But Ollie’s, which operates 257 self-described “semi-lovely” discount stores, has proved to be resilient to the Amazon onslaught, and has continued to post strong and steady top and bottom line growth.

No. 1 Ranked Discount Retailer

Founded in Pennsylvania in 1982, Ollie’s Bargain Outlet has a simple mission to sell “Good Stuff Cheap,” with a focus on closeouts, excess inventory and salvage merchandise.

It’s been a profitable niche for the July 2015 IPO. Ollie’s has generated a 41% three-year annual EPS growth rate, and sales have increased at a 19% pace of the same period.

Revenue and earnings growth have both risen in each of the last two quarters.

Although Ollie’s Bargain Outlet didn’t make IBD’s latest list of new buys by top-performing mutual funds, it has shown signs of institutional demand, including seven consecutive quarters of rising fund ownership.

With the highest possible 99 Composite Rating, Ollie’s holds the No. 1 ranking within the Retail-Discount & Variety industry group, ahead of Five Below (FIVE), Dollar Tree (DLTR), Dollar General (DG) and Big Lots (BIG).

Later-Stage Bargain Breakout?

When Ollie’s was first featured in the IBD Stock Analysis on Feb. 4, 2016, it was forming its first post-IPO base, which ended up becoming a cup with handle with a 23.09 entry.

Ollie’s broke out a month later, launching a 103% climb before reaching an all-time high of 46.08 last month.

The stock is now working on a six-week flat base with a 46.18 buy point. Note that it’s a third-stage pattern, and such later-stage formations can be risky.

But Ollie’s has continued to show support at its 10-week moving average, and its relative strength line remains near new high ground.

So look for Ollie’s Bargain Outlet to clear the buy point in heavy volume, but be sure to follow sound sell rules if the breakout fails to generate a sustained climb.


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