Concentration Builds Wealth……

When the rhetoric heats up about how just a few select names are carrying an overall soft consumer space, there is some validity to it. We hear incessant chatter about how AMZN has been crushing the brick and mortars, and how its performance really put a tailwind behind the XLY. That is correct, but that name is now 11% off its most recent yearly peak, but backing the ETF now is the action in HD. The second largest holding, has risen 28% YTD. Then SBUX, the fourth biggest component has jumped 50% in 2019. Going to be hard for the XRT to catch up when STMP, the ETF’s most influential name at more than 2% has barely moved the needle even though the laggard has more than doubled since the 5/31 session lows.

Creme Rises To The Top:

It is often mentioned that the vast majority of a stocks performance is related to the group it is in. There is a lot of truth in that, but there is something to be said about an individual name executing a successful strategy. Below we look at the behavior in six stocks within the home improvement space, in the news on the backs of big earnings reactions this week from HD (broke above a 218.69 double bottom pivot today) and LOW. Notice the rising tide has brought RH higher, but LL PIR and TTS were never able to grab their piece of the lucrative pie. All 3 of the laggards are lower by at least 51%, and PIR is down more than 90%, not a typo, after a 1:20 reverse stock split this June. TTS is down 68% from its most recent yearly peak, AFTER todays 12% gain.


Of course not all retail related plays did well today. And that should be a concern if you are a long shareholder of a name that did not perform on such a strong day for the group. Below is an example, with the chart of SFIX and how it appeared in our 8/14 Consumer Note. Thursday as the XLY enjoyed a solid session advancing nearly 2%, SFIX fell by nearly the same amount. It now trades 62% off most recent 52 week highs, and is higher just 4 days in the month of August this far. The name is on a 3 week losing streak that fell 27%, and is DOWN another 2.7% this week. Perhaps the very round 20 number will hold it at bay temporarily, but expect this name to be a teenager soon.

This article requires a Chartsmarter membership. Please click here to join.