A few weeks back, an associate and I were debating adding Bed, Bath, and Beyond (BBBY) to our buy list. I remember telling him, “No way, I don’t want to own anything in a suburban strip mall alongside Home Depot.” My comment, very biased and un-researched as it was – deserves some greater attention and begs the question. How has the Suburban Shopping Center Portfolio done?
In order to answer the question I put together a portfolio of seven stocks that remind me of the suburban shopping centers – many of which have propped up the last few years as a result of the suburban housing boom (and subsequent bust). You know the shopping center I am talking about – it usually is anchored with a Wal-Mart and Best Buy (or Circuit City). It is also quite likely to contain a Bed, Bath, and Beyond, Barnes and Noble, and of course an Applebee’s (for all the shoppers hungry after a long day of investing their home equity in flat screens, home appliances, DVD's, and other crap that adds no real value to a home). These stocks have formed the basis of my portfolio. I have graphed their performance against the S&P below:
What immediately jumps out to me is how these stocks have underperformed the S&P YTD. It appears that the more big ticket stores like BBY, CC, and BBBY are hurting big time – underperforming for the majority of the year. The smaller ticket stores such as Barnes and Noble’s, and food-driven stores (Applebee’s and Wal-Mart), have held up and outperformed up until recently where they too have taken a dive. All in all, an equally weighted portfolio would have lost money this year according to numbers above.
What does this tell us? The skeptic in me says, “Absolutely nothing, we already know this”, but I do think it is important to see how the market has already discounted the consumer a decent amount – and also how the ripples may play out into the broader economy. As big ticket consumer electronics begin to pile up – the companies who make those products may start to take a hit, leading to the chip and parts makers, materials companies, and so on. And if that does start to happen, it is all because Mr. and Mrs. Interest Only Loan couldn’t find time between paying off their bills and driving the kids to soccer practice in their Hummer to go Best Buy and eat at Applebee’s.
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