The Daily Dose: 'Tis the Season to Plot and Scheme

 | Dec 26, 2013 | 12:00 PM EST  | Comments
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Stock quotes in this article:

anf

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urbn

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m

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wmt

Happy holidays to all eyeballs that read my work daily. Believe me there is a piece of my soul in each 500-plus word document. Ovethe past few days, I have been loosely exposed to an array of interesting developments, including:

  1. Watching a bum get booted off a Long Island Railroad train for not having the desire to purchase a ticket,
  2. Sitting on a Long Island Railroad train next to three rowdy teenage girls who verbally abused at least four elderly people;
  3. Frantic calls from family members who thought I was in Roosevelt Field for a TV segment or fieldwork when there was an apparent shooting. There was no shooting; a burglar knocked down a large glass display case in Macy's (M).
  4. In my typical speed walking fashion, I almost tripped on a pile of opened pantyhose boxes at Wal-Mart (WMT). Why were they opened you ask? Someone must have thought the contents were free.

All of these fun happenings got me to wondering: investors need to be plotting and scheming on the market and individual stocks as the pros are away charge-carding year-end bonuses. These are a couple high-level thoughts to be discussing with your financial advisor either now, or on January 2, 2014.

  1. Does the U.S. consumer re-leverage in 2014 amid an expanding job market and with it, rising wages (or so we hope)? This is a key to consider, seeing that the valuations on small-cap equities and consumer discretionary remain far from compelling -- pricing in a re-leveraging of the consumer's balance sheet.
  2. Have post Fed meeting stock gains simply borrowed from January? If you believe that, then recognize that mediocre earnings pre-announcements, bad actual announcements or even good announcements could be sold by the market.
  3. The U.S. ranks 143 today in terms of fixed investment as a percentage of GDP. Does the Fed's tapering, and re-accelerating economy that wears out already worn out long-lived assets, spark a major corporate reinvestment cycle? If so, then large-cap tech is probably not getting enough love by the market at present.

Update

I am in a holding pattern in terms of stock recommendations and have some personal things in the works that are about to go live shortly. Exciting, but I have to tread carefully.

I want to reiterate a negative view on traditional teen apparel retailers in the near-term. Specifics include margin compression, lingering over-capacity and foreign competitors that own the domestic market.  Here are two broad stroke thoughts.

Traditional teen apparel retailers (exception is Urban Outfitters (URBN), they are as close to a fast fashion U.S. chain as you can get) rode to fame by making the all-American look way cooler than found in anchor department stores. The problem: kids nowadays don't want to be boxed into one look like a robot; they want to mix, match, and stand out. In 1999 it was about wearing Abercrombie to fit in, but today it's about expressing yourself through a unique t-shirt from H&M with a pair of $8 leggings from Forever 21.

Price, price price. I survey a lot of teens for my firm's research, and since 2010 (and oddly this year as household wealth has risen) the one theme has been this: we want to save mom and dad money. Households are working together like never before to save on the discretionary purchases. The reality is that fast fashion, while putting out cheaper quality products than traditional teen retailers, is able to offer eye-catching, out –the-door prices. A $10 pair of jeans from H&M looks the same 10 feet away as a $39.99 pair from Abercrombie (ANF), so you buy four pairs of the former.

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