Earnings from consumer companies are piling up, and so are the scheduled presentations by execs at investment banks. Pay attention, because the newest themes to trade on are taking shape.
Here are some things I am learning from being in the field:
Cruise line industry: Today, the new President and CEO of Norwegian Cruise Line (NCLH) Frank Del Rio will be giving one of his first presentations to analysts and investors in this new capacity. I sat down with him yesterday. In short, I like what I heard from the industry veteran, and believe he has some good plans in place to shake up the company and industry. Expect a decent amount of upbeat commentary from the company today, all supported by strong data that makes a hell of a lot of sense. Pricing is likely headed higher for the company's itineraries. Ships will be positioned in better spots. And, there will be more of a focus on driving a richer revenue stream from onboard the ships as opposed to laying out a huge amount of capital to build new ships. Building new ships has long been an obsession of cruise line execs, but requires big money and comes with lengthy build times.
I know I have been bullish on Royal Caribbean (RCL), but would rotate out of the name and into Norwegian. Based on the things I grasped, the stock could meander higher towards the low-to-mid $50s ahead of the next earnings report. Caution: now is the time to buy the cruise line operators or stay long if already having exposure. Comments on the important wave season have been bullish, undermining the concerns on the highly competitive Caribbean market. Come earnings season for the sector, then re-evaluate positions.
Homebuilding sector: Thus far, inspiring news has emanated from most of the homebuilding sector. Masco (MAS), Fortune Brands (FBHS) and Toll Brothers (TOL) all are strong in key areas. Toll Brothers CEO Doug Yearley flat out said this on Tuesday: "Momentum continues to build as we begin the spring selling season." He added: "Since the start of the second quarter, the number of signed contracts is up 13%." Toll Brothers upwardly revised its delivery guidance for 2015 to a range of 5,200 to 6,000 homes at an average price of $725,000 to $760,000. The company had previously estimated a delivery range of 5,000 to 6,000 homes at an average price of $710,000 to $760,000.
The tone around housing was not lost in Home Depot's (HD) fiscal year guidance and earnings call commentary. I had the chance to talk with Home Depot's CFO Carol Tome post earnings call. A couple takeaways, which in my view, served as reasons to stay bullish on Home Depot into the spring season:
- Connected home products will be increasingly appearing inside of Home Depot stores. Coupled with a greater presentation in Best Buy (BBY) stores for smart bulbs and smart door locks, I think the connected home is finally becoming an investment thesis. It has been one slow to develop because, for example, smart bulbs from General Electric (GE) are buried in its expansive company. Even Google's (GOOGL) Nest is buried inside the company -- Nest thermometers are now found at Best Buy. The best way to play this trend is either through semiconductor suppliers or the retailers offering the products, such as a Home Depot or Best Buy.
- I mentioned this recently, but investors continue to underestimate how many companies are preparing to beef up investment in tech infrastructure. Home Depot alone intends to spend $350 million this year on initiatives to support its "interconnected retail" efforts, in other words doing things operationally to satisfy demand wherever a customer exists. If you are researching companies and see they have slashed capex in the past three years to make an earnings or cash flow target, I would approach with caution. Not only will the shortsighted nature of their execs cause the need to intensify spending, thus weighing on net margins, but their infrastructure could be badly positioned to capitalize on new industry trends and minimize unforeseen cyber risks.
Apple Watch: "We plan to start selling programmable smart watches in 2015 from a variety of our fashion watch brands, such as Kenneth Cole and Anne Klein -- they will sold within the branded watch environments of those brands," said a Macy's (M) spokesman to me via email. He added: "No plans for Apple (AAPL) watches." Generally, major retailers continue to be very coy on how they plan to sell the Apple Watch in their stores, and the early inventory allocations. I think Apple is purposely creating a situation in which people go to its retail stores initially to buy the Apple Watch -- the company likely views it as very important the watch is sold with its store experience and customer service working hand in hand.
As for Yellen's testimony, all I have to say is this: I didn't watch it, and it was the best decision I have made in a while. You would be surprised by how not paying attention to the daily rhymes of the market, and social media, unlocks new thoughts on investing. Give it a whirl sometime.
Get an email alert each time I write an article for Real Money. Click "+Follow" next to my byline on this article.