The Real Story: BJ's Wholesale

Many people call themselves contrarian, but it's a tough thing to actually be. It's a very uncomfortable feeling to have your opinion oppose that of the majority. Additionally, you have to face an onslaught of criticism that you're somehow unscrupulously profiting from your anti-establishment views.

But as demonstrated in my first column about Lamar Advertising (LAMR Quote), The Real Story isn't going to shy away from taking a stand, contrarian or otherwise. With that first column on the books (and with apologies to Mick Jagger) please allow me to introduce myself.

Prior to joining TheStreet.com, I was a senior equity analyst with Avalon Research -- a boutique research firm that prided itself on its contrarian stance. In fact, we wouldn't cover a stock unless it went against the consensus (or was underfollowed in the case of some buy-rated stocks). I plan on taking the same approach in this column. I will point out catalysts that the Street is either unaware of or is ignoring. Once these inflection points become more obvious, the stocks often make considerable moves -- in the opposite direction of the consensus viewpoint.

Lamar Advertising, for example, is a well-loved company with some serious flaws, in my opinion. You can read about why I think the stock should be sold in my first column. Another stock that I believe merits a sell rating is BJ's Wholesale Club (BJ Quote). I covered BJ's while at Avalon. At the time, few analysts were telling investors to sell the stock outright.

I initiated coverage on BJ's in late August, when the stock was trading slightly above $29. The shares declined to a 52-week low of $25.30 on Dec. 5. With the recent spike due to takeover rumors, I believe sellers have another opportunity to get out while the getting's good.

Tough Competition

BJ's is a distant third to Costco (COST Quote) and Wal-Mart (WMT Quote)-owned Sam's Club in practically every metric in the warehouse club space. The company faces stiff competition from Costco and/or Sam's in 90% of its markets. Furthermore, BJ's plan to build new stores that are close to existing clubs appears misguided. BJ's suffers from a lack of brand equity. Putting new stores near old ones will do little to increase brand awareness.