I have stepped back from my usual rigorous day-to-day following of earnings season. I still haven't read the earnings reports from Apple (AAPL), Microsoft (MSFT), Facebook (FB), VF Corp (VFC), and Pepsi (PEP). (But I will this weekend.) And, you know what? I love it! Now, don't think I am sitting here with my hand in my rear, doing nothing; quite the contrary. Actually, I slept at TheStreet's offices today; took a 15 minute power nap around 1:15 am, chugged some Red Bull and was back at the grind, reminiscent of my earlier days in finance.
What I am doing is trying to clear my head of all these news of the day events that often appear so important one moment and are completely irrelevant three months from today (or by the weekend). In the place of the normal earnings season studying, I have sought to research industries for deeper trends and stock ideas. Here are a few thoughts from the notepad, scribbled down at 2:00am after finishing that aforementioned Red Bull.
- You Can Believe Favorable Data Readings on China and Europe
The positive aspects of the reports, such as new orders and strong business confidence, could be found in the financial statements of individual companies and in the actions executives are taking. A great example I have found is in the cruise line industry. Royal Caribbean Cruises (RCL) (reports earnings this AM) and Norwegian Cruise Lines (NCLH) are repositioning assets in the European and Chinese markets. Why? The financial trends in the regions are strong, helping to counteract intensely competitive prices in the critical Caribbean market. For both of these countries, consumers are showing little to no resilience to cruise operators pushing through price increases on tickets. Further, once on board, spending is robust at the retail and new dining experiences each operator has undertaken as part of fleet modernization efforts.
I especially want to highlight the Chinese market. Not only is capacity starting to surge in the country as operators try to capture lightning in a bottle, but the spending on board for upscale restaurants and high-end retailers is jaw-dropping. What I am seeing in terms of exec commentary on China, at least for cruises, is bullish for many comparable companies that sell premium goods and experiences. It sure makes more sense why Nike (NKE) is realizing improved results in the region. That, and the fact that the company has finally cleaned up its inventory levels and is re-imaging its shops.
Over the past six months, shares of Royal Caribbean have been the best performing among Norwegian and Carnival (CCL). I think investors are nibbling at the stock ahead of a host of new ship deliveries between 4Q14 and 4Q16, in addition to ongoing efforts to modernize one of the older fleets in the industry (the company is still sailing a ship to the Bahamas that was delivered in 1992).
- You Should Be Very Scared of Big Data
I am someone who usually thinks "oh, that will never happen to me," and then proceed to work myself into the ground. However, you and I need to start being petrified about the attacks on your personal information, and be seeking stock investments from those companies that are akin to Superman by protecting information.
The chief risk I am seeing right now is a rush by retailers to offer "omni-channel" experiences to consumers (and cloud services). In plain English, this is a retailer trying to offer seamless shopping experiences between its online store, app store, and physical store. To pull this off, retailers need information from you. The problem -- which was reaffirmed in a recent interview I have going live next Monday -- is that retailers and countless others are not thinking through the security aspect of protecting vital customer information. All of these guys are rushing to grab the sales, but not installing the proper firewalls to thwart criminal activity.
Mark this down now: there will be another major Target (TGT)-like data breach within the next 12-months; perhaps this holiday season.