As 2016 draws to a close, I believe we will look back at the last 12 months and declare it the year of the haves and the have-nots.
The disparity within groups is extraordinary this year, the gulf between the winners deep and wide and pretty much unfathomable.
Let me give you some incredible samples of the haves and have-nots that I think will rip your eyes open.
Why don't we start with the Web? First, we have three winners: Alphabet (GOOGL), Expedia (EXPE) and Facebook (FB). Alphabet, formerly known as Google, got new life breathed into it with the hiring of Ruth Porat as chief financial officer, after her amazing CFO work at Morgan Stanley (MS). I think 2016 will be the year where they really monetize YouTube. Facebook remains a money machine and a virtual monopolist of, well, yourself. Only Instagram can beat them now, and they own that, too. Expedia has become the modern way to travel.
How about the other side of the ledger? Yahoo!'s (YHOO) hideous, minus-34% as it is widely perceived as falling behind its peers even as it has a huge asset on its hands, a gigantic stake in the Alibaba (BABA). You back out that chunk of the Chinese online company and subtract Yahoo! Japan and you get, well, nothing. The stock's trading as if it is worthless. Twitter's (TWTR) down 37% for the year as it seems that whatever initiatives are tried, they can't grow the darned thing. It's a good core business, but maybe for someone else? (Google, Facebook and Twitter are part of TheStreet's Action Alerts PLUS portfolio.)
The individual slices and dices of the Web were downright awful. Yelp's (YELP) down 51% as it has stopped growing at the old pace and seems as if it has lost out to others. As is the case with Groupon (GRPN), down 61% and it could still be too early to buy the latter. TrueCar (TRUE), a Web abettor of car sales, is off 61%. Zillow (Z) changed its stock configuration, but the online real estate company's stock has been sinking like a stone from $33 down to $24 in just three months.
The industrials are a remarkable have/have-not situation. Two years ago, I don't know if you would consider GE (GE) an industrial. You might have said it is an industrial and finance company. Now that it has shed almost the entire financial business, with the rest happening in January, it's up 20% as it has sector-best 2%-4% organic growth. It's a remarkable transformation. (GE is part of TheStreet's Dividend Stock Advisor portfolio.)
Consider the other side, though. Eaton's (ETN) off 25%, Parker Hannifin (PH) and Emerson (EMR) down 26% and Caterpillar (CAT) minus 28%. Those last three seem like real winners, though, vs. machinery makers Terex (TEX), off 34%, Manitowoc (MTW), minus 35%, Cummins (CMI) down 40% and Joy (JOY) off an astounding 73%. The crowd down 25% is rather inexplicable given that they are pretty much in the same businesses as GE. They just failed to execute, although Caterpillar has more to do with the latter group. Joy makes coal equipment, so there's not much they can do. Cummins is the real outlier here. It is a truly fantastic company but truck engines just aren't selling. Well, at least it's not doing as poorly as Navistar (NAV), which has plunged 75%.
Retail's all about Amazon (AMZN), which is up an outstanding 114%. You have to imagine that it is taking huge share from Macy's (M), down 46%, Dillards (DDS), off 47%, Bed Bath & Beyond (BBBY), which has dropped 33%, Dick's (DKS), which has lost 28%, Best Buy (BBY), which has shed 24% and, finally, Ascena (ASNA) down 23%.
Then there is the real casualty, at least market capitalization wise -- Wal-Mart (WMT), which has lost 30% for the year. Yes, I truly do believe Amazon's the culprit, but the mall does also seem dead as a doornail. (Amazon is part of TheStreet's Growth Seeker portfolio.)
These retail losses seem tame vs. the apparel and accessory categories, where you have Fossil (FOSL) down 66%, Deckers (DECK) off 47%, Kate Spade (KATE) and Michael Kors (KORS) minus 46%, PVH (PVH) losing 42% and Ralph Lauren (RL) off 40%. Boy, one thing's for sure, people aren't buying apparel. The only accessories that seem to be flying off the shelves are tools; witness Home Depot (HD) rallying 24%, an extraordinary move, and sneaks, with Nike (NKE) rallying 34%. Those are amazing disparities.
Supermarkets are another amazing dichotomy. The everyday grocer, Kroger (KR), has roared ahead 27% vs. Supervalu (SVU), off 33%, Whole Foods (WFM) has lost 34%, and The Fresh Market (TFM) has gone down 42%. When you consider that these all sell pretty much the same foods, that's an incredible disparity.
Restaurants used to pretty much trade together. That's a thing of the past. The winner here is McDonald's (MCD), which is amazing, up 25%. Darden's (DRI) not too shabby either, up 21% including an outstanding quarter just reported last week.
One of the losers -- and there are many -- is Chipotle (CMG), which has given up 21% because of both the illness outbreaks and slowing same-store sales. Chipotle's not alone: Brinker's (EAT) off 21%, Habit (HABT) is down 27%, El Pollo Loco (LOCO) is minus 35% and Noodles (NDLS) is down a horrendous 59%. Ouch! Shake Shack (SHAK) was a big winner, but its plummet from $96 to $37 has really cost people a fortune. Can new management really mean that much to McDonald's? You bet it can.
You have to go back in time to the dentist where you would read Highlights to find the analogue to entertainment. Goofus loves CBS (CBS), down 17%, Discovery (DISCA), off 23%, Time Warner (TWC), which has declined 27%, and Viacom (VIA), which has been pulverized for a 47% loss. Gallant's binging on Netflix (NFLX), which has soared 138%. Only Disney's (DIS) in the middle on this one, having rallied 13%, and it would have been much more, no doubt, considering the success of Star Wars, but it's being bashed left and right by an analyst who is saying over and over that cable losses will stunt anything that the movies can do for the company.
Enterprise software's got a have, Salesforce (CRM), which has gained 29%, and a have-not, Oracle (ORCL), off 19%. One's growing like a weed and is very expensive, but the other isn't growing fast at all and is very cheap. You can see which the market prefers.
What do we make of all this? What conclusions can we draw? I think the first and most important one is that industry-sector ETFs are totally repudiated by these numbers. You homogenize everything when you do that, and the haves are lost within the have-nots. Second, the Web has truly destroyed the pricing for a whole bunch of industries and within sectors it's created its own winners and losers. The gulf between an Alphabet or a Facebook or a Yahoo! is stunning given that Yahoo! had a head start on all these companies and has fallen back so badly.
Third, when you look at what Kroger has done to the natural and organic industry, basically co-opting it for its own, you have to shudder if you are going against these guys. They have most certainly cracked the code. That's just awesome management.
Finally, you have to recognize that some models may simply not be working anymore. Is the traditional television and cable market under siege? Most definitely. Is it all Netflix? No, it is also all the alternative content, time shifting to unmeasured viewers and a healthy sense of different uses of time, whether it be Facebook or maybe even video games as Activision (ATVI), Electronic Arts (EA) and Take Two (TTWO) are up 91%, 44% and 23%, respectively.
For me, I always want to ask, now, when my charitable trust buys something, who is coming in, who has a toehold, who is taking it to a company with a stock under pressure? It's very rare that a have-not becomes a have -- witness the outlying nature of McDonald's, or vice versa, Chipotle. But when it happens, you better take notice, or else you might find yourself on the wrong side of not the trade, but the actual investment.
