Trade Fears, Weak Retail Sales Gloom Investors!
‘Don’t be into trends. Don’t make fashion own you, but you decide what you are, what you want to express by the way you dress and the way you live.’ – Gianni Versace
It goes without saying that each individual is unique and has their own way of approaching the world. Many people express their individuality through their appearance. Who has not seen the multi colored mohawk adorning a young person and wondered what statement they are making? Clothing can also be used to use as a way to set oneself apart. The fashion industry appeals to many young people with the glamour of being on the catwalk, in movies, on magazine covers, or in television. Consider how many people watch the Victoria Secret yearly special, and it is all because of the clothing, right? Well, forget that last observation. Anyway, in the fashion world, different trends come and go, whether it is denim, plaid, solids, or stripes, and trying to anticipate what might appeal to the public is easier said than done. It is why top notch designers like Tom Ford, Coco Chanel, Ralph Lauren, and a few others are thought of so highly as it is a difficult chore. Those who are able to do so, or even repeat the feat, become legends. How does this apply to investing, you might ask?
Well, it is similar in that many in the investment community are trying to anticipate what style might be more acceptable in the current economic climate. There are two basic approaches, growth and value. In the last ten years or so, growth has been the superior performer by far for any number of reasons, one pertaining to the ‘new normal’ environment of zero to minimal economic growth. With inflation and interest rates heading higher, many think value will perform much better, at the very least because it has so badly lagged and reversion to the mean would dictate it is now the more appropriate strategy. There are other tactics as well, including but not limited to deep value, merger arbitrage, or balance sheet arbitrage. My own take is you need to use a wide variety of strategies within your portfolio and individual selections probably should have some aspect of one or all of these possibilities. You don’t want to use just one as if it fails, you have a portfolio which will not perform. For example, if you focused on merger arbitrage, this week would have been difficult because the Trump Administration told Broadcom to forget about trying to buy Qualcomm. ATT also has a problem with a similar situation in it’s pursuit of Time Warner. I think you want small cap, big cap, medium cap, value, growth, mergers, takeovers, spin offs, currency plays, even options and in a wide variety of sectors. The same way that Versace approached fashion, where you select the approach that fits your life, is my thinking with respect to investing. I certainly am no Versace, but I liked his style, and more importantly, his unique approach.
Regarding the general market this week, the continuing turnover in the Trump administration with the firing of Secretary of State Rex Tillerson, a weak February retail sales number, along with the denial of the Broadcom purchase of Qualcomm, all unsettled the market a bit. On the earnings front, Signet beat but revealed a three year restructuring plan, taking the stock to fresh lows. It might be appealing to Mr. Buffett as in combination with Borsheim’s and other jewelers, there is a ton of possibility there. The price probably would be appealing to Warren as well. Williams Sonoma and Tiffany’s, both considered high end names (different sectors) got different receptions with their reports as Tiffany’s was dull while cookware was strong. Ulta Salon, the giant retail salon, disappointed but investors ignored the results as the stock rebounded strongly. In the technology area, Adobe impressed yet again with excellent subscription numbers. The water world saw a big merger with Connecticut Water merging with SJW Group. Here in Las Vegas, Golden Entertainment reported and announced they will put a bunch of money into the Stratosphere, which is similar to what Red Rock Resorts is doing with the Palms and Palace Station properties. Like fashion, resorts must look the part to attract customers.
Yale Bock, Y H & C Investments, its clients, and the family of Yale Bock have positions in the securities mentioned in the blog, Investing in securities involves risk and the potential loss of ones principal. Past performance is no guarantee of future results. All investment decisions should be considered with respect to ones risk tolerance, return objectives, liquidity needs, tax considerations, and one's overall financial situation. The fact that Yale Bock has earned the right to use the Chartered Financial Analyst in no way means or guarantees performance which will be superior to a market index.