The Bigger Picture

Client Talking Points

Retail Kings

JCPenney (JCP) is a retail giant that accounts for 8-9% of total US apparel retail. They’re a huge player that has had one heck of a ride during 2012. CEO Ron Johnson has become a focal point for many investors as they scrutinize what he’s done with the company turnaround thus far, but there’s more to the story. JCP has hemorrhaged market share and in turn, companies like Macy’s (M), Kohl’s (KSS) and Gap (GPS) have picked up business from JCP defectors. While they put up solid growth, JCP is taking a beating. CEOs at these companies won’t admit that JCP is helping them grow their sales and business. 

Take It To The House

The housing market has really exceeded expectations in terms of growth and recovery over the past three months. Existing inventory continues to drop, home prices are rising and some areas that were hit the hardest back in 2007-2008 are on the road to repair; Mortgages are also rising along with refis thanks to low rates. With today's housing starts number falling less than expected, it's clear that housing is a sector that is on the mend and has the potential for plenty of upside. 

Asset Allocation

CASH 55% US EQUITIES 21%
INTL EQUITIES 12% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 12%

Top Long Ideas

Company Ticker Sector Duration
NKE

Our competitors are neutral to bearish on the name ahead of earnings, but we think they’re missing the bigger picture. We think concerns over the shoe cycle rolling over are overdone. With R&D in the mid-teens, NKE has the ability to drive the ‘sneaker cycle’ in a case of “the tail wagging the dog”. We also think $NKE is a candidate for releasing a special dividend when they report EPS next week.

SBUX

Uncertainty in US from a macro perspective (jobless claims uptick) gives us pause from TRADE perspective although coffee prices will serve as a tailwind going forward. Company is becoming more complex, taking on risk as it acquires new brands. Longer-term, we view Starbucks, along with YUM, as one of the most attractive global growth stories in our space.

FDX

Margins are in a cycle trough as the USPS is on the brink. FDX is taking more share in the U.S. and following the recent $TNT news flow we think $UPS is in a tough spot.

Three for the Road

TWEET OF THE DAY

"Market Up, $AAPL down, just another day" -@Keeneonmarket

QUOTE OF THE DAY

"Democracy is the theory that the common people know what they want and deserve to get it good and hard." -H.L. Mencken

STAT OF THE DAY

US Housing Starts Fell 3% in November to 861,000. Building Permits rise 3.6% in November.


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