Aussie retail stocks are flying up lately.
Yesterday it was the turn of online furniture retailer Temple & Webster [ASX:TPW]. It rose nearly 9% on the day and is up 20% in a couple of weeks.
This follows on from ripping runs in Cettire [ASX:CTT], JB Hi-Fi [ASX:JBH] and Nick Scali [ASX:NCK].
A friend of mine told me he “should” have bought up the sector last year.
What stopped him?
You can guess – all the macro noise about interest rates, the Fed, recession and all the rest of it.
In my small cap advisory, Australian Small Cap Investigator, I did happen to recommend a retailer – Beacon Lighting Group [ASX:BLX].
It’s now up 47% in about a year…
In hindsight, one could say I went a bit early.
It’s only since about December, like most of the market, that Beacon began to really move. (Clearly, I might have recommended a few others too!)
I’m glad I stayed the course here.
We all have weaknesses when it comes to the market.
For my buddy, it was focusing too much on variables he can’t control, and often may not matter long term anyway.
For me, it’s impatience.
Often stocks just need time to move. They can dawdle, dip and drag like a recalcitrant teenager.
My tendency is to sell them off and go looking for some action elsewhere. Then I’ll look back and cringe at what happened after.
Last year was a perfect time to plant many market “seeds” and see what sprouts. Stocks were hammered. Sentiment was in the toilet.
It was a market to accumulate shares in a business you were happy to hold for 2 years or more.
In this case, like Beacon.
I remember mentioning the idea to another friend of mine. He was dismissive. I ignored him and told my readers to get their hands on it.
What is to like about Beacon?
One is that it has a key shareholder in the Robinson family. They have every incentive to nurture and grow the business.
Plus Beacon is muscling into the international market. And they also have a small commercial property fund. They are also growing their store network.
In other words, they are slowly building out a growing business, on top of the excellent results they’ve already achieved over a long time.
Last year you could have bought BLX for about 10x earnings. That, relative to the market and its history, was a steal.
You did have to hold your nose and put aside all the factors that seemed so scary last year.
And now what do we see? Retail shares are flying! 6 months can make an astounding difference.
I’m not telling you today to buy retail stocks. I suspect, in the short term, we’ve seen the “reset” move for most of them.
However, even with the recent market rally, there are shares all over the market that are still depressed.
I’d put the Real Estate Investment Trusts in this category. But also a whole bunch of finance related names too.
Recently I put together this report with 5 small cap names that I think are set to fly up like retailers are now.
Again, I may be early. Of course, I could also be wrong. Small caps sit at the riskiest and most speculative end of the market. But the potential reward is so good you’re almost crazy not consider them.
You see…
When it came the retailers last year, one bit of help I had was that I knew they had peaked in 2021. That meant by late 2023 they had been under the pump for 2 years.
2 years?
That’s a LONG time in the market.
All the bad news was well and truly hammered into their prices by then.
Who, really, was left to sell at that point?
In hindsight, not many.
Granted, there’s always the risk that the long term prospects of a business are going down too.
There is one retailer, KMD Brands [ASX:KMD], that seems to be sinking like a stone. I don’t know why.
This is where a bit of investigation can pay off. Many retailers were still reporting healthy (if not record) sales last year.
I also knew shopping mall centres like Scentre Group [ASX:SCG] were reporting record visitations.
It didn’t make sense of them to have huge foot traffic but for retailers to trade as if we were in the GFC.
Here’s another thing. I have been at Fat Tail for 12 years. I’ve seen the stock market cycle go around a few times now.
In fact, one of the stocks in my new report is a previous recommendation of mine. Not once, but twice before!
Readers who followed my advice both previous times benefitted. I have full confidence they will a third time.
Why?
Read the report and see for yourself.
My only suggestion: don’t be impatient like me, and don’t let the macro noise distract you from buying great stocks on the floor.
Often, they don’t stay there for long. Beacon didn’t, and I don’t expect these 5 to either.
Best,
 |
Callum Newman,
Editor, Small-Cap Systems
and Australian Small-Cap Investigator
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