Get used to hearing the term "hybrid," because we are not going to be living not in a free world or a lock down life, but in a hybrid world where stay-at-home habits have staying power, but the pull to go out, whether at work or at play, is a mighty imperative.
We've been playing a guessing game on Wall Street about what the consumer is going to do once she is vaccinated. I have been saying the game is futile, you have to go with habits that fit either scenario.
I want to double down on that now with some new insights that make it more clear what can work and what can't fully acknowledging the hedged bet position.
In other words, as much as I like the cruise ships, the Centers for Disease Control and Prevention sure doesn't, and that makes buying them hard here. And as much as I love Domino's (DPZ) banana peppers -- no cheese please, and I think the quarter will be a good one -- I can see that the market's questioning my judgment vs., say, Darden (DRI) , which somehow the market has decided it can't miss.
Why am I so sure that things are going to be hybrid? First, I am relying on a gamut of executives not including Jamie Dimon, the CEO of JPMorgan (JPM) who acknowledged in his annual letter to shareholders that a mixed model is now with us. Perhaps for good: "Some employees will be working under a hybrid model, e.g. some days per week in a location and the other days at home." He goes on to write "And a small percentage of employees maybe 10%, will possibly be working full time from home for very specific roles."
Now this is not coming from a fan of the at-home style of work. Dimon worries about a culture that could be lost, because so much at his bank is based on the apprentice model and, he says, "it is impossible to replicate in the Zoom (ZM) world. Spontaneous learning and speed of decisions made take a big hit with Zoom, but it has become a reality for even its most staunch opponents.
So what habits survive a hybrid model. We know Home Depot's (HD) stock has been roaring, along with Lowe's (LOW) because home prices are at their highest in 15 years. When homes appreciate in value those who viewed them as an unfortunate expense begin to imagine them as assets that need capital to maintain them.
I think that you are not too late to keep buying these two. Why? Because of something Josh Silverman, the CEO of Etsy (ETSY) told me last month in a virtual interview I had with him at the 92nd St. Y in New York. He said that out of nowhere, customers began to order anything garden-related -- seeds, gardening equipment, pots and trowels. If you go to the site today, what do you see on your home page? How about seed kits, English Lavender, plant seeds and a variety of garden seeds. 'Tis the season for gardening right now.
There's one problem: Those two stocks are at their highs. What's the solution? I think it's not too late to buy Walmart (WMT) . We know this is a seasonably strong time for the stock, as our "Off the Charts" segment last week with Larry Williams showed on "Mad Money." Second, Walmart will be benefiting from chatter about when it is going to be selling a portion of its Flipkart Indian Amazon (AMZN) -like retailer. But I think that what makes this one an ideal hybrid stock is that Walmart has become a go-to place to get vaccinated.
Here's a stock that is well below its high, $139 down from $153, that's getting no love: It's off almost 3% this year, well below the market's 8% gain. That's a natural, ahead of the first huge gardening weekend, to get price target boost or an upgrade.
Stanley Black & Decker's (SWK) stock took a breather today after a huge run, and all I can say is that if you are going through the aisles of Home Depot or Lowe's, you are going to see that brand name throughout their operations. It's no longer a cheap stock, but the estimates are most likely too low, because of all of the remodeling going on, so you've got some eager analysts who probably want to boost price targets given the strength the stock has been exhibiting.
We've been huge believers in Williams-Sonoma (WSM) as it has both catalogues where sales for outdoor equipment and indoor bedrooms turned offices, but also brick-and-mortar stores that are crushing it now that the mall is back. Williams Sonoma is only in "A" malls now and "A" malls are doing incredibly well, according to Simon Properties (SPG) , so it remains a win.
But here's a thought that you must be cognizant of: The concept of the sunk costs. We were under lockdown long enough that many of us bought equipment that's going to be used no matter what. You didn't buy that air fryer to throw it out now that you can go out to dinner did you? How about that beautiful outdoor grill? Do you just keep the cover on and shove it into a corner of your patio? I don't think so.
Oh, and while we are at it, did you make friends with your neighbors like we did? Did you have them over? Did you go to Club Q, our rotating quarantine in Summit New Jersey, where the habits of going out to the garage are now so ingrained, it's too late to pause them?
If you did, then you might be spending money on something that I never thought of as hybrid: McCormick (MKC) . Many have looked at this company as an either/or, one of those dangerous stocks where the comparisons could be brutal as we get into the summer.
I know I felt that way, because of the company itself, which talked about possibly reduced demand. Now though, I am re-thinking the situation. That's because, first 20% of the business is food service, which is coming back as the lockdowns wind their course. McCormick's really the ultimate condiment company whether it be at he quick serve, or the café!
Will people abandon the stay-at-home uses of French's Mustard, Cholula hot sauce -- a brand new acquisition -- or Frank's Hot Sauce? I would have said yes, if it weren't for the sunk costs that are going to keep people cooking at home much more.
In fact, I think that McCormick might hold the key to more hybrid ideas than any other company, because a true hybrid home play can only be determined if a routine is one that you "have to " have because of the lockdown or "want to" have, because it's just plain fun or you got used to it and just like it. Now, before you jump up and down in anticipation, I don't think there are that many habits that really fit into the "want to" pattern beyond cooking, where you need the McCormick spice of life or perhaps Pinterest which makes you a hobbyist or Etsy, which truly is packed, again, with home gear that makes you want to peruse for more.
I like the limited nature of this category, because when you have something like this in the teeth of the freedom vs. lockdown moment, you want to press the bet. There aren't many, but when you have one you need to go big or go-hybrid style-to home and office.