We just had the most successful Cyber Monday in history with sales up 30%. Mobile sales were up the astonishing 70%. And all of this, on top of very strong Black Friday. What does it mean:
1) Online shopping – the future is here. People feel more comfortable doing it and this trend will only accelerate across the world. 5 years ago, people used to say that if you have online presence, the whole world is your potential customer. Today, if you don’t have an online presence, you basically don’t exist. $AMZN and $EBAY have been the biggest beneficiaries of this trend as they simply are mind share leaders in this category. It is their battle to lose. Brick and mortar shops are so far behind.
2) The U.S. consumer is alive and well and as we all know, its spending drives not only the U.S., but also the world economy. Some might opine that more people taking advantage of one-time deals means that the consumer is trapped and desperately looking for savings. At the end of the day, the mere fact that more people are spending more is indicative of improving consumer confidence. Maybe all that news about housing recovery is actually creating the so called “wealth effect” – when people feel good about their future, they tend to spend more.
You have probably heard it from thousand different sources – one of the reasons why hedge and mutual funds have trouble outperforming the S & P 500 is the increased correlation in the market. There are binders of research done on the subject, but what most have missed is the time-frame. Yes, in short-term perspective, correlation has risen to levels never seen before. During steep market corrections and the initial stages of a recovery, correlation often comes extremely close to 1.00, meaning that everything moves in one direction disregarding of underlying fundamentals and growth prospects. But if you take a step back and look at stocks from a longer-term perspective, you will realize that stock picking today matters as much as ever.
From a 10,000 foot view, Dillard’s and J.C. Penney are both simple department stores, which well being is highly influenced by the economic cycle. They both suffered 90% cut in market cap during the 2008/2009 financial fiasco, but as you can see from the chart above, their recovery stories are very different.
While $JCP is still struggling to hold above its levels from the fall of 2008, $DDS just hit another all-time high and it has come a long way over the past 4 years. You didn’t have to be a retail expert and addicted shopper to figure out which one would perform better. All you had to do is watch the 52-week highs list and shop your stocks from there.