Good morning investors,
Retail and mall stocks surged yesterday after investors listened in to the highly anticipated ICR retail conference yesterday. Almost every retailer at the conference reiterated the same thing: demand is strong, Omicron has a minimal impact and inflation is not slowing down sales.
There were a lot of key companies that provided updated guidance on Q4 sales which also helped the sector including American Eagle (AEO) and Abercrombie & Fitch (ANF). Abercrombie & Fitch specifically stated that there was so much demand into Q4 that they did not have enough inventory to meet it. Other executives pointed to significantly strong pricing trends with very little promotional activity. High pricing and low promotions leads to strong merchandise margins and free cash flow.
I am heavily weighted towards to retail sector in particular heading into 2022. It is my single largest sector exposure with over 20% of my portfolio tied up into two different retailers. If the United States doesn’t shut down again from some random COVID variant, the sector seems like a no brainer slam dunk. Even the bigger more dominant players in the space seem like buys at this point.
I continue to hold my favorite retail names and stay constructive on the sector. In a month or so we will start getting quarterly data on specific companies along with guidance for 2022. Should my thesis hold, I think we see significant upside with limited downside.
Discover new investment ideas on Commonstock: Commonstock lets you access the portfolios and investment insights of verified top investors. It's the only social investing platform where you can connect your existing brokerage accounts to make and share your trades in real-time. See what's trending, find new investment ideas, and connect with a community that's deeply interested in the same topics you are. Anyone can sign up for a Commonstock account for free - no subscriptions, no paywalls. Read more.
Abercrombie & Fitch rallies after strong guidance update: A&F expects FY21 sales to be up in the range of 19% to 20% compared to 2020 and up 2% to 3% compared to 2019. Operating margin of 9% to 10% is also anticipated, in-line with a prior outlook. CEO update: "Strong response to our winter and holiday collections, including standout performance in jeans, dresses and sweaters, enabled us to maintain our planned promotional cadence, including reducing the depth of our promotions over the peak Black Friday/Cyber Monday period and throughout December... Looking ahead, we expect to minimize the gross margin impact of late deliveries by balancing promotional depth and utilizing pack-and-hold where appropriate." Read more.
American Eagle Outfitters is higher after guidance tops expectations: American Eagle Outfitters is higher after issuing a strong update on holiday sales, including that it is on track to achieve $600M in operating income for fiscal 2021. The retailer is due to present later today at the ICR Conference. For FY23, AEO targets revenue of approximately $5.8B vs. $5.4B consensus and operating income of $800B, with the operating margin expanding to 13.5%. Read More.
Oil's relentless march higher - WTI tops $80, energy equities follow: West Texas oil prices are higher by ~$3 this afternoon on light supply news, indicating refineries and speculators are bidding up the price of the commodity as Omicron-linked demand concerns wane. WTI is now up ~8% ytd, the US producers are up ~13%, and large Canadian producers like Cenovus and MEG are up 16%; the S&P 500 is down slightly YTD. Read More.
Nancy Pelosi Loads Up On Tech Stocks: The greatest investor in the world, Nancy Pelosi, recently filed a disclosure form showing that she purchased a handful of tech stocks worth millions. These stocks include Alphabet Class A Inc. (GOOGL), The Walt Disney Co. (DIS), Roblox Corp. (RBLX), salesforce.com (CRM) and Micro Technology (MU). The purchases occurred right before Christmas and just days after Pelosi had a press conference in which she urged that members of congress should be allowed to actively trade stocks because of a “free market”. Read More.
Disclaimer: The publisher does not guarantee the accuracy or completeness of the information provided in this page. All statements and expressions herein are the sole opinion of the author or paid advertiser.
Alpha Letter is a publisher of financial information, not an investment advisor. We do not provide personalized or individualized investment advice or information that is tailored to the needs of any particular recipient.
THE INFORMATION CONTAINED ON THIS WEBSITE IS NOT AND SHOULD NOT BE CONSTRUED AS INVESTMENT ADVICE, AND DOES NOT PURPORT TO BE AND DOES NOT EXPRESS ANY OPINION AS TO THE PRICE AT WHICH THE SECURITIES OF ANY COMPANY MAY TRADE AT ANY TIME. THE INFORMATION AND OPINIONS PROVIDED HEREIN SHOULD NOT BE TAKEN AS SPECIFIC ADVICE ON THE MERITS OF ANY INVESTMENT DECISION. INVESTORS SHOULD MAKE THEIR OWN INVESTIGATION AND DECISIONS REGARDING THE PROSPECTS OF ANY COMPANY DISCUSSED HEREIN BASED ON SUCH INVESTORS’ OWN REVIEW OF PUBLICLY AVAILABLE INFORMATION AND SHOULD NOT RELY ON THE INFORMATION CONTAINED HEREIN.
No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned.
Any projections, market outlooks or estimates herein are forward looking statements and are inherently unreliable. They are based upon certain assumptions and should not be construed to be indicative of the actual events that will occur. Other events that were not taken into account may occur and may significantly affect the returns or performance of the securities discussed herein. The information provided herein is based on matters as they exist as of the date of preparation and not as of any future date, and the publisher undertakes no obligation to correct, update or revise the information in this document or to otherwise provide any additional material.
The publisher, its affiliates, and clients of the a publisher or its affiliates may currently have long or short positions in the securities of the companies mentioned herein, or may have such a position in the future (and therefore may profit from fluctuations in the trading price of the securities). To the extent such persons do have such positions, there is no guarantee that such persons will maintain such positions.
Neither the publisher nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein.
The two best performing stocks in my portfolio right now are the two names of yours that I had a flutter on - one coal, one retail. Of course, because they are only flutters, the sums aren’t huge, but still. Thank you. Looking forward to seeing where next for the all-in portfolio.
Sidebar, are you also Dr Patel or are you just BFFs?
You’ve got to be very happy with $AMR today😊!