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Subject:  American Eagle Date:  3/1/2006  10:20 PM
Author:  hheiserman Number:  831 of 1817

Merchandise well bought is merchandise well sold. --John Neff's dad

I am selling American Eagle (AEOS) because I do not know what its competitive advantage is.

I still think the Pittsburgh, PA-based retailer is undervalued. But competitive advantage is the connective tissue between earnings quality (past) and valuation (future). And since AEOS does not have any of Morningstar's four kinds of competitive advantages (low-cost producer, high switching costs, intangibles, and network effect), I am happy to sell into strength.

We made a few bucks on this name, but I want to focus on companies with wider moats. Since I wrote about American Eagle on this site, I wanted to let you know about my decision.

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