Monday, January 3, 2011

Few 2010 Stories as Told by Mr. Market



People often mention that the market is "forward looking": that is, market action often forebodes the future. The S&P bottomed out in March 2009, well before the broader economy started recovering. Here are a few 20/20 hindsight observations from 2010. Keep in mind that the S&P had its yearly low in July and returned about 15% for the year:

The surprisingly strong holiday shopping season: XRT, the broad retail ETF, did not have its yearly low in July. It bottomed out in February and got close to that in July. There is probably a certain technical analysis significance to this but, for me, it is evident only in retrospect. XRT started rallying in September (both with the broader market and with the decent back-to-school data).

Did your rent increase this year? The rent concessions by the large apartment REITs (EQR, AVB, UDR, ESS, etc.) started reversing last year and all are now posting solid rate increases on new and renewal leases. When did their stocks bottom? Early February.

The unemployment rate is routinely described as "stubbornly high" be it U3 or the "real" U6. Can we expect some change there? Well, my four employment horsemen, Manpower, Robert Half, Kelly and Monster all outdid the S&P for the year, ditto with the more niche DHX. May be good news are on the horizon even there. Even uniform providers GKSR and UNF beat the S&P (though the largest, CTAS, did not).

We often read that the "rich" are doing very well. What is the story there? Sotheby's, (ticker BID), perhaps one of the purest "rich people" investment plays, bottomed in February, like XRT discussed above. It is up 100% for the year, in case you were wondering how the "moneyed elites" were doing. BMW (owner of the eponymous aspirational car brand but Rolls-Royce as well) also bottomed early and near-doubled for the year. To complete your package, tuck a Herm├Ęs in your pocket: up 70%, again, no July dip here either.

Related to employment and retail spending is travel spending: a number of names there are running really hot. PCLN and TZOO were up almost 250% and 90% respectively, the cruise duopoly, RCL and CCL are up 90% and 50% respectively. Hotels are back: the big names, MAR, HOT, WYN, GET, H are up multiples of the broader market, ranging from 50% to 85%. Heck, even "horse and buggy" LodgeNet (LNET) somehow managed to lose only 20% on the year.

And, don't forget the ladies: shockingly, they do want to look and feel beautiful, regardless of billions of pending mortgage putbacks. A semi-random sampling from my "beauty" tracking list shows a pretty picture: LULU up 130%+, Estee Lauder (EL) and Arden (RDEN) up 65%, FACE and Interparfum IPAR 50%+; salon stuff distributor HELE up 25%.

See, isn't hindsight easy?

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