Chris Versace is CIO of Tematica Research. This article is from the firm’s Oct. 10 Monday Morning Kickoff newsletter.
Over the next few days, we should get a fuller picture on the number of disruptions and destruction left in the wake of Hurricane Matthew. While the hurricane led to Disney (DIS) shutting its Florida parks, one silver lining to the storm is likely to be a pickup in repair and remodel spending over the coming weeks and months. Subscribers to Tematica Investing have been well-positioned to capitalize on current upticks in building and remodeling activity, and a post-hurricane mini-boom will certainly help those numbers along.
This week, there will be a number of data points to watch including the fallout to be had from last night’s Presidential debate, the minutes from the Fed’s September FOMC meeting (Wednesday, October 12), the inflation gauge that is the Producer Price Index (Friday, October 14) and the next Retail Sales report (also Friday, October 14). In examining the September Retail Sales Report we’ll be looking through the various line items that pertain to our Cash-Strapped Consumer, Rise & Fall of the Middle Class and Connected Society investing themes.
Later this week, we have the official start to September quarter earnings season, as Alcoa (AA) issues its results for the quarter as well as its outlook for the current quarter and beyond. Given the impact of its business on a number of manufacturing-related industries, management’s commentary on its conference call will be one we’ll be dissecting this week. The same can be said for both CSX (CSX) and JB Hunt Transport Services (JBHT) — if goods are not moving around the country, it’s not a good sign for manufacturing and consumption.
As we get ready to gear up for year-end holiday spending (yes, it is almost that time once again), prepaid card and network company Blackhawk Networks (HAWK) is also on our radar screen this week. As we listen to the company’s results and outlook, we’ll be looking to square it up against recent 2016 holiday shopping forecasts. Last week, the National Retail Federation released its 2016 holiday sales forecast, which calls for a 3.6 percent increase to $655.8 billion with online sales growing between 7 percent and 10 percent to as much as $117 billion (nearly 18 percent of total holiday sales).
By comparison, RetailNext sees overall 2016 holiday retail sales climbing 3.2 percent year over year (excluding automobiles and gas) with digital sales soaring 14.9 percent to account for 16 percent of total holiday retail sales in 2016, up from 14.4 percent in 2015. There is no doubt the accelerating shift to digital shopping bodes well for our Connected Society and Cashless Consumption investment themes at the expense of brick-and-mortar retail. Why else would Wal-Mart (WMT) announce it is “pulling back on new store growth” and focusing on e-commerce with a plan that calls for a doubling the number of its large warehouses focused on e-commerce sales to 10 by the end of 2016.
Our strategy over the last few weeks with the Tematica Investing Select List has been to use stock specific weakness to grow those positions while improving our cost basis. We expect to do more of the same in the coming days and weeks as well as pick off a few well-positioned companies at better prices than we saw just a few months ago. Hopefully, you can say the same.
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