@reecevan ,
Continuing discussion from the MEA thread:
Discretionary retail:
I think it's still far too early to be buying into anything involving discretionary spending. Even the ostensibly "good" retailers - ADH, CCX, JBH, NCK, PMV, SUL - aren't being spared the snapping shut of wallets and purses.
Ditto, then for consumer finance businesses, which I suspect are going to be caught in the vice of higher funding costs on the one hand, and a cat fight for custom on the other.
(And don't even start on receivables factoring and debt collection businesses - witness CLH which has just entered administration)
Consumer distribution:
Ugh.
These are some of the flakiest business models going: look at BWX which is basically being bailed out via an emergency equity issuance.
(One distribution business I own, DDR, is partly consumer-facing, but it is rather unique in its market positioning as well as its peerless execution track record. No doubt its long-serving executive team - all with very meaningless stakes in the business, which they routinely increase - has something to do with the success.)
Online Retail:
I've never been a fan of; too opaque for me and very volume driven-businesses which do fine as long as they don't get caught with stock. KGN is a rubbish business, in my view, CTT looks interesting in the specific market it targets and TPW has some brand resonance (I think), but even then, it's going to be a tough period ahead for even the best online guys.
"Old" Media:
SWM, SXL - look cheap on P/E basis, and SWM has some appeal as a deleveraging story, but the "E" for these high fixed cost businesses could pretty quickly crumble in a heap if the ad cycle sours (which, I suspect it is doing.)
Banks:
Meh. Banks are enjoying some margin relief, but a fight for market share in the slowing credit growth world looms, I think.
Property sector:
The property stocks I reviewed - particularly, ENN - I like.
But BWF and ENN are not really domestic cyclicals, they are really funds management businesses
(And even MEA I've decided warrants a closer look after the error of my analytical ways have been pointed out to me)
Recreation & leisure:
AMS is a business whose viability is not possible to determine... feels to me like one of those "certain place and time"" business that often pop up, but I'm remotely sure it can endure.
ENN is a property manager, but it co-invests in its largest fund, the Elanor Hotel Fund, which is experiencing a rebound following Covid lockdowns muted the performance of the underlying assets of the fund.
CHL is also not a domestic cyclical at all (not sure why I included it in that category); it's an emerging platform technology stock.
So, I've basically abandoned looking any further at these sorts domestic cyclicals, because while they might appear cheap, I think that there are far better quality businesses in the technology space which have also been smashed in recent months, but which I feel far more comfortable buying because they possess pricing power and are therefore able to be the architects of their own destinies, instead of having to simply cop the whipsawing of the economic cycle.
Your views on all of this?
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