Retail stocks continue to lag. I would continue to lay off the entire retail sector including commercial real estate assets and pick selectively on those that have promising e-commerce programs that have been jointly thrown out with the sector bath water. Walmart (WMT, $75.12) is the obvious choice here with the lead acquisition of Jet.com, followed by several other subsequent acquisitions by ecom shop-a-holic Mark Lore. Target (TGT, $55.04) has been lagging due to their well documented failures with the Cartwheel app but a hedged bet on a company with historic drive to succeed may pay off on the long term.
Mall-based retailers are obvious short candidates at this point though finding one with enough meat on the bones may be difficult. Macy's (M, $23.01) and Nordstrom's (JWN, $40.81) were the cream of the crop but the 'Fast Times at Mallrat High' party has ended for these prom queens and we are headed into a significant redefinition or buyout stage. Kohl's (KSS, $37.09) remains scrappy and hybrid of the off price retailers though TJ Maxx (TJX, $74.77) seems to fare better amidst the bargainers, and the move to trade up and down within a bracketed range seems to be the correct move here as KSS buys back stock and short-sellers jump upon the 'short'-lived burst. Barnes and Nobles (BKS, $7.40), Sears Holding (SHLD, $7.96), and JC Penney (JCP, $4.67) seemed doom to failure, reorganization, or worse (barring a typhoon level trend change), the companies seem headed toward an ominous fate. If you can find borrow, congratulations but the bones are bare and perhaps a brothy soup is all that is left.
Manufacturers that relied on retail are suffering a similar fate. For example, Under Armor (UA, $17.70) and Lululemon (LULU, $49.14), have been beaten back. UA recovered with a upside surprise in the Q1 earnings but the pullback in LULU coupled with the buyout rumors may make it the only palatable pick in the lot today. Further pullback in UA, a simmering down of Kevin Plank's Make America Great sentiment, and further Tier 1 sponsorship catalysts into international and soccer, make UA a champion on the ropes that still has knockout power in their roundhouse.
Speaking of beaten back, regarding the United Airlines (UAL, $76.18) bump up after the social media fiasco, the climb seems to have lost steam and the 'short squeeze of those negative naysayers' the stock has maybe subsided. Those hedgies may move to other fast money pastures now that they've collected their knee-jerk emotional reaction premium. So look for the stock to settle back down despite the fear and propaganda of UAL doubling in price. Longer term, Jet Blue Airlines (JBLU, $20.96) is the winner and better operator in that pack and longer term maybe a better play.
In the technology space, AI, autonomous driving, and AR/VR drive the trends. And we believe Nvidia (NVDA, $127.72) is the speedy chip company with the gaming history to drive that speed in the processing, and makes the long term play en-vogue right now. It's a dog eat dog world these and Intel (INTC, $35.04) recent purchase of Mobileye (MBLY, $61.69) signals their concern on the issue. Internet 'real estate' like Etsy (ETSY, $12.94) and Snapchat (SNAP, $19.90) still hold much value despite rumors of their demise. For higher beta trading transactions, trading these names within a range also makes sense here.