We don't want to lose more theses. The airlines were bedrock after we thought the bottom was put in with that last quarter, and then the best of the best, Southwest (LUV) , throws cold water on the whole thesis with a projection of 4% to 5% passenger revenue per seat mile.
I remain steadfast that the group has bottomed and United Continental (UAL) is the way to play it. But Southwest down here is quite intriguing. I am not saying ignore the negative story. I am saying 2017 will be better than 2016.
Aircraft itself as an industry would be under a challenge from Southwest's decision not to expand, but I think the issue is the type of aircraft. It's the mix. If you make the right planes, narrow bodies, you can coin money. If you make the wrong plane, wide bodies, you aren't doing as well.
Boeing (BA) makes both. When you combine it with comments from United Technologies (UTX) and Honeywell (HON) , the thesis remains intact. Our suggested way is to buy Alcoa (AA) because it is integral to the process, and with the split you are going to get a company that looks like Precision CastParts (PCP) , the company bought at a huge premium by Berkshire Hathaway (BRK.B) , as well as a very cheap pure play on the commodity.
The home thesis, as I wrote yesterday, remains challenged and the bogeyman is purely housing turnover. I think this industry is part of the national funk that's plagued the country since the election rhetoric got so heated. You get rid of the election, you get rid of the funk. The way to play it would be to buy Home Depot (HD) and TJX (TJX) , the latter an Action Alerts PLUS name that owns Home Goods, much less expensive than the rest.
Candidly, I am confused by the end of the housing thesis story, given that we are building half as many homes as we did when we had half as many people in the country.
Again, though, I think it is all about the malaise, which can abate. I wouldn't sell my house right now. I would be a buyer as inventory rebuilds. But other than TJX and Home Depot, call me indifferent.
Still not sure about apparel. I think there could be a bottom being put in, but I recognize the group is still too overvalued on a P-E basis. It's tough to buy Under Armour (UA) at 48x earnings with 20% growth rate, but I do think that at a certain price it's a go, and I do think that Nike (NKE) can bottom here. I see Lululemon (LULU) up on takeover talk and I think, while that is terrific, why wouldn't you just wait until a quarter that is supposed to have negative comps?
Finally, Chipotle (CMG) ? I know people are giving up on it. Remember, these cycles take 18 months to play out, meaning that the American people are finally able to forgive and forget after 18 months, which is what previous incidents tell us. We are only at month 10, so be patient or don't be there.
Just own Panera (PNRA) , which was just fine.
Autos? I know they have gone so out of favor as for GM (GM) to catch a downgrade because of sentiment. You don't sell something because everyone else is selling something. I do worry about existential threats to car ownership, but not at $31 with an almost 5% yield, especially with the Chinese market doing so well. That's not peak auto, if you ask me.
Of course, these are retrospective. I can offer Twitter (TWTR) -- no thanks -- Google (GOOGL) -- why not wait at this point since it has hit an all-time high -- and Amazon (AMZN) -- same deal but biggest total addressable market in the world -- as options, but I am thinking this is a market where it has paid to see them jump the gun, and I am sticking by that. (Under Armour and Amazon are part of TheStreet's Growth Seeker portfolio.)
Needless to say, don't want to bury the lead, but I think there could be a second day of down for Apple (AAPL) -- said so myself in a video I did with Jack Mohr (see above) -- but if you don't own any, by all means don't let me stop you from buying some. (Alcoa, TJX, Panera, Google and Apple are part of TheStreet's Action Alerts PLUS portfolio.)