It was a bounce back day for the broader markets with the S&P 500 rallying 1.05%, the Dow Jones Industrial Average gaining 311 points, and the tech heavy Nasdaq jumping 1.25%.

Over the past couple of days, the focus of our Investing Club discussion has been on tech because that was where the majority of the selling pressure has been. Coming into today, tech was also the group that looked the closest to being oversold, with the Nasdaq down 7.5% from its highs after yesterday’s session.

But tech is only one part of the broader markets. In an effort to keep the Investing Club up to speed on what’s happening in the other areas of the charitable trust, we wanted to take a moment and provide an update on our three retail positions: Costco, Walmart, and American Eagle Outfitters.

Update: Costco

First up is Costco. Here is a retailer that continues to do everything right for its customers and is always the first to lower its prices and the last one to raise them, as management explained two weeks ago on the company’s fiscal fourth quarter earnings call. Even in an inflationary environment, Costco’s tremendous size, scale, and buying power have allowed them to navigate supply chain challenges better than others.

Meanwhile, the company continues to pick up market share based on the incredible value of its membership program that consistently grows in size. Costco is a winner, and we only wish the stock price would pull back more so that we could add to our position for the charitable trust.

Update: Walmart

How about Walmart? This charitable trust holding has been an underperformer all year, but that in itself is never a reason to give up on a stock. We think the selling in WMT could be over for now, and this recent decline to the mid-to-upper $130s has finally brought the price down to an interesting level to buy if you did not already own it.

Down more than 5% year to date, we think the stock is cheap and could be due for a catch-up to the fundamentals soon. Management has raised its earnings outlook two quarters in a row now, and we think the company’s continued focus on investment will help the retailer emerge from the pandemic in an even stronger position than when it entered.

Update: American Eagle Outfitters

Last, but most important is American Eagle Outfitters. Shares sold off hard this afternoon on no news from the company specifically, but investors who are focused on retail have been nervous about the group lately due to the sharp rise in cotton prices and potential supply chain issues out of Vietnam. These are issues we will continue to monitor, but we also do not want to let those storylines get in the way of what we think is a highly undervalued franchise.

Let’s take a look at the company’s different parts. On one hand, the Aerie brand remains one of the hottest growth stories in all of retail with 27 consecutive quarters of double-digit growth. On track to deliver a 25%+ revenue compound annual growth rate through 2023, Aerie is experiencing strength in key categories like intimates, swim, casualwear, and lounge.

Meanwhile, the American Eagle brand is well-positioned to benefit from what could be a multi-year cycle in denim. There is also an underappreciated earnings momentum story here through management’s newfound focus on profitability over chasing sales.

Despite the success American Eagle Outfitters is currently having, for some reason the stock trades at a low teen price-to-earnings multiple. This looks way too cheap to us.

In a recent sum-of-the-parts exercise, analysts at JPMorgan, who currently have a $42 price target on AEO, valued Aerie like the growth retailer it is and placed a non-distressed retail multiple on American Eagle. JPMorgan’s sum-of-the-parts work suggests there is significant room for upside at current levels, and we agree.

American Eagle Outfitters also offers its shareholders a safe dividend. At the stock’s current price, the dividend yield is near 3%. As shareholders, we believe this yield provides a solid compensation for our patience in this underappreciated story.

Bottom line, AEO is a stock we think is undervalued, and we are sticking with this position for the charitable trust.