Consumer Discretionary

Highlights While internet retail moved to the mainstream more than a decade ago, it continues to capture the lion's share of retail growth and investors' imaginations along with it. Further, the philosophy of "profits don't matter" in pursuit of explosive growth has been replaced with more…

Overweight It has paid handsomely to be overweight the S&P home improvement retail index over the past year. However, the last few months have seen a significant step upward in valuation (top panel), we think with good reason. First, lumber prices have pushed through modern highs, driven…

Overweight The S&P advertising index has finally caught a bid as Q4 earnings came in better than expected, driven by solid improvements in organic revenue growth. This is supported by industry pricing power which is in the midst of a v-shaped recovery (second panel). More importantly,…

Underweight The S&P hotels, resorts and cruise lines index had a remarkable run between 2016 and 2017, handily outperforming the S&P 500 (top panel). We downgraded the index to underperform in September of last year as the resulting valuation multiple spike (second panel) was…

Risk management is important in tumultuous times. Our long held strategy of how to navigate choppy waters during a tactical correction has been to book gains in pair trades and thus de-risk the portfolio, and institute trailing stops to the high-flyers in our high-conviction call list. Two…

Highlights A thorough audit of our trade book highlights that our country and sector allocation recommendations have been quite profitable for investors. Of the 12 active trades in our book, 11 have generated a positive return, including one with a 32% annualized rate of return. A review of…

Neutral The recently released National Restaurant Association's Restaurant Performance Index turned up solidly in November, building on momentum earned in the early parts of 2017 (second panel). Further, the Expectations Index, a reflection of restaurant operators' six-month outlook, rose to its…

Underweight Presenters at this week's Detroit Auto Show have reason to celebrate; December light vehicle sales numbers showed the industry had sold more than 17 million vehicles for a third consecutive year, marking the best winning streak ever for auto makers. Even better, falling pricing…

Equities have melted up in recent weeks, celebrating the tax bill passage, synchronized upswing in global economic data, still quiescent inflation and near vanishing tail risk. On July 10th when we penned the "SPX 3,000?" report, the S&P 500 was close to 2400.1 Over the past six months stocks…

Late last year, we downgraded the S&P homebuilders index to high-conviction underweight, citing three reasons: rising borrowing costs impacting affordability, pending homeowner-unfriendly tax reform and high (and rising) costs. With respect to the first of these, housing affordability has…