The numbers from BBBY and RT really spoke loud; however, many people seem to have ignored this because they are too worried about dumb banks. Those earnings showed me that the consumer is NOT dead. This is a rather risky trade but if I managed billions, I would be telling the boys (and girls) to start getting overweight Consumer Discretionary and underweight Consumer Staples. Here is a small list that focuses on Restaurants and Apparel Stores.
Restaurants:
High Short Interest: LN, PNRA, PFCB, CMG, BWLD, SNS, RRGB, DIN, CBRL, AND TXRH.
Cheapos under $5: RUTH, DENN, KKD, MRT, TAST, CHUX, and MSSR.
Higher Quality Names: YUM, DRI
(Note: names like: DPZ and PZZA are also interesting due to price friendly products)
Apparel Stores
High Short Interest: JOSB, JCG, BKE, MW, DSW, JWN, ANF, HOTT, GYMB, ZUMZ
Cheapos under $5: PSUN, TWB, CACH, SHRS, SMRT, WTSLA, TLB, NWY, CBK
Higher Quality Names: All of them suck right now!
Like I said these are just two industries related to the consumer, there are many more I have researched. I will post buys when I make them but take a look at some of these names. I would look at Restaurants harder than Apparel Stores; however, there are many more industries that are tied to the consumer, that maybe worth a look. The key is to get creative and ponder.
As for high short interest, please note that shorts are way smarter than the longs, for many reasons. Shorts do their homework; however, heavily shorted stocks can lead to short squeezes (often lead by other hedge funds) leading to a surge in a stock, for a nice quick trade. The market is nothing more than 70 hedge funds battling it out with each other and then you have the mutual funds (the 401k buyers). Hedge funds try to find out other hedge fund positions, then try to short them, to hurt the other hedge funds or vice versa, so they can get a higher return and steal clients from their competitors (this stuff really goes on). Anyways, the main point is that if a company is highly shorted, it’s probably for a good reason. However, just because a stock is at $10 and worth $0, doesn’t mean it can’t go to $25 in between. Just ask the commercial real estate short sellers.
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The restaurants are really rocking right now - RT is up over 600% since the beginning of March. Last week on the 8th, RT was up over 60% just based on beating earnings. Haven't had the time to run the numbers in detail on DRI, but everytime I have been to an Olive Garden or Red Lobster in the past year they have been hopping! Might be something to this - fully agree with RF on this one.
ReplyDeletethanks for ideas
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