B.I.G. Tips – Retail Sales Rebound

Oct 16, 2020

After a disappointment last month, Retail Sales saw a nice rebound in September as consumers seem undeterred from spending despite the expiration of extended UI benefits and the lack of an additional stimulus bill.  For the month of September, headline Retail Sales rose 1.9% m/m versus expectations for a more modest increase of 0.8%.  Ex Autos and Gas, growth was even better relative to expectations, although August’s already slower than expected growth was revised modestly lower.

Breadth in this month’s report was strong.  Of the thirteen sectors that comprise the total pie, all but one of them (Electronics and Appliances) showed growth.  Normally, when a sector shows m/m growth of a percent or two, it’s impressive.  This month, though, the volatility of the pandemic remains in place as two sectors showed growth of over 5%, including Clothing which saw double-digit growth relative to August!

While the monthly pace of retail sales is back at all-time highs, the characteristics behind the total level of sales have changed markedly in the post COVID world.  In our just-released B.I.G. Tips report, we looked at these changing dynamics to highlight the groups that have been the biggest winners and losers from the shifts.  For anyone with more than a passing interest in how the COVID outbreak is impacting the economy, our monthly update on retail sales is a must-read.  To see the report, sign up for a monthly Bespoke Premium membership now!

B.I.G. Tips – Death by Amazon – 10/13/20

Oct 13, 2020

Amazon is now up over 1700% since inception of our Death By Amazon indices, while our equally-weighted Death By Amazon index has lagged the S&P 1500 by 70 percentage points over that period. Amazon hasn’t managed to push back above its July 9th relative performance when it rose to 5.83% of the S&P 500’s market cap. Earnings are due in 10 days, with analysts expecting EPS to rise over 70% versus a year ago on revenues 31.7% higher. Contrary to popular perception, Amazon is very profitable. For Q3, analysts forecast a 14.6% EBITDA margin versus 13.8% a year ago, meaning the company earns 17 cents of EBITDA for each dollar of new revenue. Of course, much of that comes from cloud, where competitive pressures are intensifying, but cash flow is cash flow at the end of the day. As for competitors, the fact that we’ve removed another name from our index this month (SMRT due to bankruptcy) is just more evidence of the force of Amazon at work.

Our “Death By Amazon” index was created many years ago to provide investors with a list of retailers we view as vulnerable to competition from e-commerce.  In 2016, we also created our “Amazon Survivors” index which is made up of companies that look more capable of dealing with the threat from online shopping.  To see how the two indices have been performing lately and view the full list of stocks that make up the indices, please read our newest report on the subject available to Bespoke Premium and Bespoke Institutional members.

To unlock our “Death By Amazon” and “Amazon Survivors” indices, login or start a two-week free trial to either Bespoke Premium or Bespoke Institutional.

B.I.G. Tips – Here Comes Earnings Season

Oct 13, 2020

We’re thirteen days into the fourth quarter, but today was the first real day of earnings reports as a number of major banks and other firms in the S&P 500 reported Q3 earnings.  As shown in the table below, of the seven S&P 500 companies that reported today, five topped EPS forecasts, and six out of seven reported better than expected revenues.  The only disappointment relative to expectations was Delta (DAL) which missed both the top and bottom line.  While the results have been positive relative to expectations, investors have mostly been selling the news.  Of the seven companies that reported today, six are down on the day, and all of them are down at least 1.5%.  All in all, the median performance of the seven stocks shown is a decline of 2.22%…not exactly a sign of upside surprise from the market.

What can we expect to see from the market as earnings season progresses?  Make sure to check our quarterly preview of the upcoming earnings season for a look at how analyst sentiment tends to impact market performance during earnings season. For anyone with more than a passing interest in what to expect from the market during earnings season, make sure you check out this report.  To see it, sign up for a monthly Bespoke Premium membership now!