It's Fashion Week in New York and I can't think of a better time to talk about what's fashionable in the stock market. Each weekend I go over what stocks are hitting new highs -- our equivalent of the runway -- and it is startling how often the styles change.
First, the hottest style, the one that can't be kept stocked? Cybersecurity stocks. It makes sense. Ever since the former chief executive officer of Target (TGT) lost his job because of a breach, the CEOs of all major companies have had to focus on this issue. Just as, at one time, no executive ever lost his job spending on marketing, now no CEO will ever lose his job spending on cybersecurity.
Last week we got some astounding reports out of FireEye (FEYE) and CyberArk (CYBR), two highly visible companies in the space, that showed execs just throwing money at this problem. FireEye does forensics as well as offer a security package that sells well once the company is in the door. The revenue growth here is spectacular. CyberArk provides a master-key solution among other plans for companies eager to put an arc behind a key portion of the business, with the CEO playing Noah in the production.
These companies are joined by Palo Alto Networks (PANW), which I thought had had too much of a run but it never stops because there are simply so many breaches that there's no end to the orders. I also put Fortinet (FTNT) in the mix because of its excellent threat assessment product that we recently reviewed on Mad Money. I also was struck by how important cybersecurity is to the re-acceleration of growth for Cisco (CSCO), which embeds it in Cisco's digitization process from the get-go instead of having it sit on top of the boxes, so to speak, and being run by the independents just mentioned.
How can these stocks keep running? Wrong question. I say, why not? I have never seen a group have more of an in-your-face unmet need on a daily basis.
Consider just this morning when we read about the billions stolen from banks by Russian hackers. That's why I hand-check my balance at my bank every single Monday. I think I now have to update that to every-day status.
President Obama, of course, makes the case for buying these stocks with conferences like he had last week.
Are they expensive? Hey, come on, it is Fashion Week, and these are really in fashion and they stay in fashion until we get gigantic insider selling and then they are halted in their tracks -- until the next cybersecurity story breaks which is, sadly, inevitable.
What else is running? Medical devices. Any medical devices. Whether it be Edwards Lifesciences (EW) or Boston Scientific (BSX) or Medtronic (MDT), which reported a stellar quarter and that's before they even closed on Covidien. Becton Dickinson's (BDX) on the warpath, too, and that will be a great stock over the next year because of its purchase of CareFusion (CFN). Given the incredible expansion of medical care under Obama, it is hard for these companies not to do well.
Not to say that companies aren't trying to cut health care costs. Here the fashion show endlessly puts its spotlight on classics like McKesson (MCK), AmerisourceBergen (ABC), Brunswick (BC), Cardinal Health (CAH) and CVS (CVS), as well as United Health (UNH), Humana (HUM) and Cigna (CI). How strong is this trend? Consider the fate of the stock of Anthem (ANTM), the company behind Blue Cross and Blue Shield after it got hacked. It didn't skip a beat, it just went higher.
Readers of this column know that domestic retail has just been screaming, and I think that continues. The stocks that have been shining: TJX (TJX), Ross Stores (ROST), Nordstrom (JWN), Home Depot (HD), Bed Bath and Beyond (BBBY), Best Buy (BBY), Big Lots (BIG), the dollar stores and Costco (COST).
Now here's the tricky thing about this group. This week we get two big retailers reporting, Nordstrom and Wal-Mart (WMT). This morning, Barclays initiated research on Nordstrom as a sell. Ouch! We know Nordstrom has been spending fortunes on its omnichannel, but Barclays is talking about how it is all too expensive. Wal-Mart? We haven't heard a peep out of it but we just presume that it's been a big winner in terms of consumer discretionary spending. In fact, all of these stocks have been oil plays. I wouldn't back away from them and I thought when we came in this morning and the chatter was all about Greece that these stocks would come down. Looks like people are at last getting wise to the idea that Greece is a sideshow, but it didn't hurt the cause that Europe rallied, too. Hey, if they can rally, we can rally!
Domestic housing's suddenly strutting the runway. Here's a group that had been given up for dead just a few weeks ago when KB Homes (KBH) reported a terrible number and looked totally out of fashion. Since then it's been nothing but good numbers from the group, and it's become the height of fashion along with everything that goes into a house, which means Sherwin-Williams (SHW), PPG (PPG), Stanley Black & Decker (SWK) and Whirlpool (WHR).
Travel's nonstop in traveling higher. Priceline (PCLN) reports this week, and you know my feelings about that one. It is preternaturally disposed to being gloomy in its outlook, so I would buy it after you read the headline that it cut forecast. The combination of Expedia (EXPE) and Orbitz (OWW) is striking people as most fashionable, as is the number from TripAdvisor (TRIP).
How strong is travel as a concept? Strong enough for a good man to lose his job. I am talking about how Adam Aron, late of Vale (VALE), the resort company, took over the CEO job from Frits Van Paasschen at Starwood (HOT). Frits, a frequent visitor on Mad Money, had a long-term vision about returning value to shareholders via special dividends. Last week he announced he is splitting the company to look a lot more like Marriott and Marriott Vacations World, but it wasn't fast enough for the board, which wants immediate action to keep up with the growth of the segment, which has been phenomenal. Marriott (MAR) and Wyndham (WYN) have been growing much faster than Starwood, and now Aron is tasked, as interim CEO, to play catch-up.
And then there's the ubiquitous defense stocks. This group seems to be able to do no wrong whatsoever, and the unfortunate ISIS enemy has made it so every country seems to need more hardware. Northrop Grumman (NOC), Lockheed Martin (LMT), General Dynamics (GD) and Harris (HRS), which just bought Elexis -- another one of our favorites -- are all in the sweet spot. It doesn't matter what they make or what they do, they are regarded as the arsenal of democracies and dictatorships against the growing threat of this movement. When Jordan and Egypt attack ISIS, it means more orders for these companies.
Finally there's the inevitable natural and organic. WhiteWave (WWAV) is a tsunami of strength. Whole Foods (WFM) is totally back on track after that last quarter. Hain (HAIN) and Chipotle (CMG) bide their time and that's just plain opportunity knocking.
I am not saying all of these companies represent bargains. Fashion is, per se, not a bargain. Some of the cybersecurity stocks in particular are ridiculously overvalued. But right now it just doesn't matter. That's how hot the fashion trend is.
I typically don't like to invest in what's hot. But trading it, that's a different story. And as Fashion Week continues, you can bet these all have further to go.
