Monday, December 16, 2013

Note to Investors...Did a little shopping (AEO)...and Global Update

The following is a note that I sent to Soos Global investors last week.  It is an example of the types of regular communication that we have with our investors and often results in very value added exchanges as investors from disparate perches opine and comment.  The quick note below on American Eagle Outfitters (AEO) triggered comments as diverse as EBITDA stats on comparable retailers, to anecdotal evidence of our investors' teens whose shopping at AEO is evident by the number of AEO bags around the house!
One critical note to bear in mind:  The commentary is absolutely NOT to be considered investment advice nor any recommendation on the stock.  All commentaries about Soos Global investment activities are meant for information purposes only and for entertainment value.  Our decision to purchase the stock, or any stock, for out managed accounts is made in the context of the overall portfolio positions, risk management and unique investor financial profiles.  Please consider this disclaimer seriously and read our more complete disclaimer material below.


Quick investor update….
I did some shopping….not for clothes, but for the stock!  (American Eagle Outfitters: AEO)

After the company recently announced lower guidance for Q4, the stock has been hammered, reaching levels that currently look attractive.  So I’ve added a small position.  The near 3.5% dividend goes ex in a few days, so that’s a good timing advantage.  The store remains appealing even among many of the fickle teen category (emphasis on ‘fickle’), balance sheet is clean, and they’re growing internationally.

Lots of the reports on the Christmas selling season overall have been underwhelming, so a great deal of negativity is already priced in, and many of the moves that management has said they’re undertaking to tackle the tough environment sound compelling.

Separately, my global outlook is remains cautiously optimistic.  I like the recent deal on the US budget, not because it’s such a great deal, but because it’s at least a ‘deal’ and one that will avoid another round of government shutdown tremors!  Growth data in the US remains on course for an economy that is recovering at a slow pace, and a pace that makes equity valuations look toppish but not bubble-ish.  As you can imagine, I’m not too put off by the sell-off of recent days, as I think that is a healthy ‘de-steaming’ of the market that was getting a bit too hot.

In Europe, the story remains the same:  stabilizing, but vulnerable.  The former comes in the form of some signs of growth that is lifting some of the countries out of recession, but the latter comes in the form of still massive debt loads and painfully high levels of unemployment.

In Asia, Japan’s Abenomics seems to be off to a reasonable start and it appears likely that with the Fed about to ‘taper’ and the BOJ likely to keep pumping in liquidity and other stimulus into the economy, the YEN ought to continue to weaken vs the USD which will help Japan’s heavily dependent export industries.

China’s reforms, on paper, look good.  How they’re executed will have to be watched closely, but the early signs are good, and growth appears to be heading towards a more stable level of 7.5-8.0%.

So, in a nutshell, cautiously optimistic…..still holding historically high levels of cash….looking for and buying value opportunities on market sell-offs….and building on the theme of an emerging middle class in the developing world.

Will keep you posted.



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(Please note: This article is solely meant to be thought provoking and is not in any way meant to be personal investment advice. Each investor is obligated to opine and decide for themselves as to the appropriateness of anything said in this article to their unique financial profile, risk tolerances and portfolio goals).
Disclaimer: Please read and consider important information related to all communication made by Soos Global on this site by clicking here.
Additional Disclaimer: currently long many stocks/ETFs, incl AEO.  Positions may change at any time without notice.

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