Key Points: Staples have underperformed the market on a one-, three-, five- and ten-year basis. They were paragons of pricing power for much of the 80’s and 90’s, but the group has fallen from grace. This report analyzes the stocks from both a fundamental and a tactical perspective. We also seek to understand what makes the stocks tick.
Key Points: After being steadfastly bullish on the consumer for two and a half years, we became more cautious back in July. We don’t see a major problem ahead, but our forecasts call for a considerable slowdown in spending growth. We think we’ve got the general direction right, but there’s plenty of uncertainty to go around. The data have also been a moving target, so we think it makes sense to be prepared for a
Key Points: For those interested in the distribution of things, there’s been a treasure trove of data released over the past few weeks. In this report we analyze trends using the American Time Use Survey, the Fed’s Distributional Financial Accounts, and the Consumer Expenditure Survey. We tease out important trends by age, income and generation from each of those data sets.
Key Points: This report introduces a new framework that we call “In the Weeds”. By dissecting business models into their component parts, we can understand what makes companies tick. The first iteration of the framework focuses on dollar stores, home improvement stocks, specialty retailers, and mass merchants. Over time, we intend to add other industries to our arsenal. We analyze ~25 companies on traditional metrics that include sales per square foot, operating margins, inventory turnover,
Key Points: Goods are coming back in style, and that’s one of the key reasons we shifted our industry weightings a few months ago – out of leisure stocks and into rate-sensitive durables. In this report, we analyze retail stocks that should also benefit from a return to spending on goods. We put forth three unique ways to analyze retailers: (i) sales per square “footprint”, (ii) inflation-adjusted same store sales, and (iii) inventory “freshness”. Sales
Key Points: Employment is the engine of consumption growth, and it’s shifted into low gear. The aim of this report is to determine whether monetary policy will soften the blow. We assess the effect lower rates might have on (i) the consumers’ P&L, (ii) the low-end consumer, (iii) spending on goods versus services, (iv) the housing market, and (v) home values.
Bill Rhodes led AutoZone for nearly 20 years. Over that time, the auto parts industry faced major change — auto cycles have come and gone, the industry has consolidated, e-Commerce has altered the landscape, and vehicles have become laden with technology. So far, it seems that the more things have changed, the more they’ve stayed the same — AutoZone has remained relevant to its customers and its business model has stayed the course. More change is on the horizon — EVs are making inroads, etc. …
Friday’s revision to income and spending data has caused confusion. We’ve prepared a 10-minute podcast to review the investment implications. Some of the changes can be disregarded as noise, but there are three important takeaways. First, the latest iteration of personal income is highly disconnected from labor market data. Second, this is not the first time savings rates have been meaningfully revised, nor will it be last. Investors should move on from using the savings rate as an investable data point. Household balance sheets are…
Yesterday, we caught up with Carol Tome, the CEO of UPS. We covered a lot of ground … as UPS typically does! We talked about the state of the global supply chain, the shift between goods and services, the de minimis rule, tariffs, UPS’ relationship with Amazon, the labor market, driverless vehicles, drones, AI, and more. Click the link to view our 20-minute interview. So far, we’ve hosted the CEOs of Delta, Home Depot, and UPS. There’s more to come. Sign up for our podcast…
We’ve been getting a lot of questions from clients about the low-end consumer, so we assembled a deck of charts to walk through the pros and cons of betting on the low-end. There are a lot of variables to consider, and we walk through a chunk of them on this podcast, including job-finding prospects, wage growth, SNAP benefits, tariffs, interest rates, and stock price performance. As always, feel free to reach out with questions.
We hosted a webinar reviewing the changing landscape for the US consumer. We are entering a new phase and see weaker spending growth ahead. This has significant implications for portfolio weightings. We have lightened up on our exposure to leisure stocks and are instead recommending clients over-weight rate-sensitive durables like housing, autos, and RVs. We assess the odds of a recession emerging and take questions from clients.
Today we caught up with Ted Decker, the CEO of Home Depot. We talked about the health of the consumer, the state of the housing market, the “lock-in” effect, AI, and more. I asked how long the hangover in COVID-friendly categories like BBQ grills, outdoor furniture and washing machines might last. He compared the dynamic to a hurricane, which made a lot of sense to me. Home Depot has seen plenty of hurricanes over time, and they’re using those experiences to inform buying decisions. This…