Staying on the sidelines during a volatile market isn't an option or some investors. You might be a money manager tasked with making clients gobs of money, or perhaps you're a retail trader who can't shake your ingrained nature to try to make money by the minute, hour and day.
So, here are my best investing ideas, along with their appropriate time horizons:
Shorting Keurig Green Mountain (GMCR)
Time Horizon: Hold into 2016
This week brought the arrival of the Kold machine, GMCR's key new product that allows consumers to make carbonated beverages at home. Coca-Cola (KO) is one of the company's early Kold partners, as is Dr Pepper Snapple (DPS).
However, Wall Street has criticized the device as absurd, not to mention slamming the amount that Keurig is spending on Kold's development, manufacturing and marketing. GMCR plans to shell out a whopping $100 million this year to try to get Kold into people's homes, with the same amount of spending planned for 2016.
I attended GMCR's Kold launch party on Monday, trying every single "flavor pod" that's available and questioning a host of executives about it. And I'm here to tell you, that device is poised to be a colossal failure that will likely lead to inventory write-downs, bruised earnings and a possible CEO ouster some time in the next 12 to 18 months.
Those are bold statements, but Kold is so important -- and ridiculous at the same time -- that predicting disaster is the only thing I think is warranted right now.
Here's why I think this device will be a major miss:
The price point ($369.99 for the machine and $4.99 for a four-pack of pods) limits its likely adoption to a very small subset of the global population. Consumers already have an equally solid option in buying a similar device from SodaStream International (SODA) at the fraction of the cost. In fact, the consumer group targeted for the product might not understand why they need a soda-making device next to their Keurig brewer in the kitchen.
Green Mountain execs are under the illusion that the Kold will be put in the den and used to entertain during parties. Not for nothing, but the U.S. population is shifting back to an urban environment -- where dens and extra rooms aren't the norm.
Another problem is that the Kold doesn't offer the "wow" factor to hook the consumers that can afford it. First of all, it takes a full 90 seconds to make an eight-ounce soda on the machine. For a product seeking to tap into the "Hurried Economy," 90 seconds is almost like an hour.
Second, the drink itself doesn't come out that cold. It's certainly cold, but not as cold as when a person puts ice into a soda or chills a bottle in the freezer for a little bit prior to consuming.
And there's already a great alternative option in the market for soda consumption called a "vending machine." A can of Coke from a vending machine will cost you around $1 to buy, then you simply consume it and toss the can away.
By contrast, one pod for the Kold is about $1.25 and you have to clean your glass afterward (and look at a relatively large gadget in your kitchen or den). My suggestion for an alternative: a 12-pack of Coke.
I honestly wish Keurig well with this device, as you can tell the company put a great deal of engineering into it. But I believe you'll see the Kold marked down 50% by the holiday-shopping season's end and that GMCR won't be at all pleased with the device's early adoption. Wall Street will then swoop in for the attack.
Shorting McDonald's (MCD)
Time Horizon: Short-term (into the next earnings report)
Betting against the Golden Arches might seem risky at the moment, as the stock is showing some resilience and just caught a brokerage upgrade. The company also has favorable news looming with the launch of all-day breakfast on Oct. 6.
However, I talk to enough fast-food executives to conclude that McDonald's isn't on the comeback trail just yet. If MCD beats third-quarter earnings estimates (which is a risk with this call), it will be due to cost cutting instead of hearty U.S. sales.
There are also a couple of reasons to stay very skeptical about McDonald's.
For openers, the fast-food business is quite saturated. So, if MCD's efforts to make its meals better grab back customers, other chains will have to start underperforming.
I don't currently see that. Burger King (a Restaurant Brands International (RSI) unit) is on fire. Cash strapped consumers are driving right by a McDonald's and going to Burger King for limited-time offerings such as spicy chicken fries and the black Halloween burger (which tastes like a Whopper).
Among other chains, pizza players Papa John's (PZZA), Domino's (DPZ) and countless upstart fast-casual chains such as Blaze Pizza also remain on fire. Believe it or not, Taco Bell is also rocking. So is KFC. (Both are Yum! Brands (YUM) subsidiaries.) And shares of Sonic (SONC) have been crushed lately more by Wall Street factors than consumers favoring McDonald's.
The bottom line: Others in the industry will have to show more-sluggish sales to suggest that big behemoth McDonald's has got its groove back.
I also think that McDonald's menu remains woefully inadequate, especially among newer offerings like the Egg White Delight McMuffin and Buttermilk Crispy Chicken. The food lacks inspiration and creativity -- and if it had these things, McDonald's would be able to keep competitors at bay.
I understand McDonald's will never be Shake Shack (SHAK), but it could be much more creative in what it releases.
For example, the company should have taken up Burger King on the "Peace Day" burger. The fact that it didn't tells me that the arrogant culture of McDonald's continues to persist, and that the company has yet to hit rock bottom. When you hit rock bottom, you try bold new things and hopefully reap the rewards.
Going Long on V.F. Corp. (VFC)
Time Horizon: 12 Months
I spent yesterday with various team members at V.F. Corp.'s North Face subsidiary (the company's largest brand) and left absolutely impressed.
Management is thinking exactly the way executives at a winning company should. It's seeking new avenues of growth (footwear, women's apparel and the training market) while protecting its home turf of highly technical gear for outdoor enthusiasts. And it actually delivers what it says it's going to in terms of product.
After talking with the brand's president Tuesday morning, I headed over to the brand's "showroom show" to check out the Spring 2016 line (see photos on @BrianSozzi on Twitter). Basically, I got a preview of everything that will be on shop floors next spring.
- I think North Face is making a big, positive change in how it delivers product to the market. The company plans to ship items targeted for the growing training market every month instead of all at once, as has historically been the brand's practice. That will have the effect of keeping the product interesting-looking on the sales floor, giving North Face a better chance of stealing share from Nike (NKE) and Under Armour (UA).
- The design of some of the new products (notably in womenswear) are very profit-margin friendly. I laid eyes on super-lightweight clothing (in one case almost see-through) that's priced on par with Lululemon (LULU) -- if not even pricier given the technical expertise that's designed into a North Face garment. In Wall Street lingo, North Face is poised to deliver a much-stronger sales mix in 2016.
- Importantly, the brand's seemingly pricey clothing is designed better than most any competition in the category, including the stuff from Nike, Under Armour and definitely Lululemon. That gives the consumer a reason to buy.
- I also like how the company is entering newer styles in the important women's business, such as versatile tank tops and jogger pants. Even though North Face has produced stellar results for quite some time, these are items the brand isn't known for. But consumers appear likely to embrace the new merchandise due to the quality and the needs that it addresses.