Sometimes doing nothing is the best policy and the last two weeks have been exactly that. There’s been a small amount of portfolio adjustments, but nothing too serious. If I have something more exciting to report, I would have. There isn’t anything. Credit spreads are tiny and investors are generally not being very adequately compensated for risk.
In a “would have, should have” world, Lululemon (Nasdaq: LULU) would have been a short in my portfolio a year ago, but that opportunity has now passed. Coach (NYSE: COH) is also on that short list. Both of these are subjected to confirmation bias by females that I know are into these sorts of things. Both of them are trading at valuations which can (now) be considered reasonable (LULU still being a tad expensive, but not as ridiculous as they were before), but both brand names are clearly on the downtrend. In fashion, trends are everything. Apparently Kate Spade (Nasdaq: KATE) is the next up-and-comer and while traditional valuation metrics say this one is very expensive, perhaps talk to some teenagers that have disposable income and your opinion may change.
No positions, just curious. It makes outlet shopping somewhat more tolerable when looking at these various brands from a purely financial perspective.
Doing investment research these days (when the S&P 500 has reached all-time highs) feels like mining Bitcoins – a very high-energy consuming process with a very high probability you will get zero return on investment.
I was afforded the luxury of having some dedicated time off and did about six hours of research, most of which was on the US equity side. Initially, I did some preliminary screening of the Canadian side for potential value stocks, but mostly turned up ones relating to gold mining, which I very rarely dabble in just because I do not have strong thoughts about the metal other than it looks pretty when holding it. I decided to focus on the US equity market instead and broadened my screen to avoid stocks that were explicitly trading at their relative lows.
The net result of this was I did some fairly heavy research on two companies of which were closer to their 52-week highs than their lows (which is always a turn-off, but it is nearly impossible to find anything that is trading at their lows these days which were worthy of further research). One of these companies was a retailer, the other was a company selling customized consumer products which appeared to be on the cusp of becoming a universally known name. I will focus on the first one.
Retailers, especially those that cater toward women’s fashions (e.g. Coach (NYSE: COH), please note this was not the retailer, but I am consistently fascinated how they can produce the financial results they do) are very difficult to analyze from an equity perspective. I can read the financial statements and tell you how much money they are making and how they are making it, but predicting how much mind-share they will have in the consumer market (and in Coach’s case, the mind share they have with women, which I am not one of) is a very critical and intangible asset to measure.
I will keep these companies on my watchlist and just be patient. The cash value in the portfolio continues to be quite high and it is earning a whopping zero percent yield, but the easy way to lose money is to throw it at something for the sake of having it invested.
The end of November is as good a time as any to look for candidates that are ripe for tax loss selling, but they are consisting of companies that are related to precious metals, biotechs with particular clinical trial blow-ups and obscure semiconductor companies with genuine issues that caused them to plummet in the first place. I haven’t been able to find too much.