They are selling the slow-growth stories, the McCormicks, the TJXs, because, out of nowhere, now that we have survived the inversion, we are right back into boomtown.
I get it. McCormick (MKC) , the spice company, is the ultimate stay-at-home-don't-go-out-let's-cook story. McCormick says recession.
So, even though these two companies are going to make a lot of money off their core businesses, they are considered persona non-grata, at least until we get a couple soft numbers or the inversion happens again.
I think all of this is a silly game. I like both McCormick and TJX, but I love an Estee Lauder (EL) , a company that takes risks, that out-executes and is defying gravity. McCormick and TJX are doing exactly what they should, exactly what they know. Or, to put it another way, they are always going to make the playoffs.
But Estee Lauder? They are trying to win the Super Bowl. Fabrizio Freda is Bill Belichick.
How can I claim this? OK, not that long ago Estee Lauder relied heavily on the U.S department store for about a third of its business. It knew that brick and mortar was the place to be.
Now, though, he knows many of the potential buyers for prestige makeup don't go into the department stores. They don't even go into the mall. They go on line or they go to an Ulta (ULTA) , a channel that would have been unthinkable not that long ago but is now one of the best doors for Estee Lauder.
Meanwhile, Estee Lauder's Freda painstakingly goes on the road to talk to young people all over the globe -- especially in China -- to see what they like. He has hero brands that can sell the world over.
The idea of switching back and forth from a Lowe's (LOW) to a TJX and back again is something that the hedge funds can do. Many of them can switch back and forth. But the better way to think of stocks is to think of which management has figured out the landscape, which management knows how to take risks rather than be outmoded.
It would have been so easy to say, if you were Freda, that earnings were hurt because traffic at Macy's was down and traffic and Bon-Ton simply ended. It would be easy to say that the Hong Kong protests are hurting one of its key showcases. But he didn't because he actually saw these coming. Was he somehow able to look around the corner and spot these danger zones?
No, not at all. He recognized buying patterns, helped by excellent people who work with him and who know where they will be challenged. They do their assignments. They get the job done.
Sound like the Patriots? It should.
That's what kind of team Freda runs and that's how you get a stock of a company that sells the ultimate in discretionary goods to do well in an environment everyone else is bemoaning as too difficult to traverse.