We added CATO to our portfolio on February 1, the day before it announced sales results for January. Although same-store sales declined by 15%, the stock rallied on the news since it was not as bad as feared. The entire retail sector has taken a pounding recently, but the rotational nature of investor sentiment means this sector should recover once short term selling pressure abates.

As I stated in the original buy alert last week when CATO briefly dipped below $25, “we’re expecting a ‘dead cat bounce’ off its lower Bollinger Band… back up towards its 50DMA value near $29.” I still believe that is the case, hopefully no later than March 15 when the company issues its next quarterly earnings report and forward guidance.

In the meantime, I don’t expect anything dramatic to happen with this holding. It is a small-cap stock ($677 million) without much analyst coverage, so its share price tends to float until an event-driven news item draws attention to it.