Good news keeps rolling in about the domestic U.S. economy — jobs are back, the dollar is strong, oil is cheap, wages are up. All great news to be sure, but it has to be taken in context with the outside world.
All these things that look good aren’t occurring for the best of reasons.
The jobs recovery is more a ‘bartender and waitress’ recovery than it is a ‘middle class’ recovery. That’s not really good for real estate, small business owners, financial institutions or consumer-based companies.
The strong dollar is because the rest of the world is having a very tough time getting on the growth track. Europe is sucking wind, Japan is as well. China is in its slowest growth period in decades. Commodity-based economies like Canada and Australia are hurting from the lack of global demand. The U.S. dollar is a safe haven at this point — fear based motivation, not greed based.
Oil is cheap precisely because global growth is barely moving the meter. Simple supply and demand says we have plenty of supply because there’s waning demand. Oil services companies like Halliburton Company (NYSE:HAL) and Baker Hughes Incorporated (NYSE:BHI) are laying off thousands of workers and drilling is abruptly shutting down around the globe, including the U.S. shales.
So, while Apple Inc (NASDAQ:AAPL) is the poster child of the global business success story, that story isn’t a larger consumer success story across the industry.
Bottom line: whether they depend on the U.S. market or the international market, you have to be extremely selective with consumer stocks right now. And just as it’s important to know what to buy; you could argue it’s even more important that you know what to sell.
Below are three consumer stocks that it’s time to sell.
Sturm, Ruger & Company (NYSE:RGR)
It may be hard to believe that Sturm, Ruger & Company (NYSE:RGR) makes this list, but it’s off 44% in the past year. Sturm, Ruger & Company has been in a long, steady decline.
Some say its massive $100 million stock buyback program that was announced last year shows its committed to shareholder value, as does its nearly 4% dividend. Plus, the buy-side argues the stock is oversold and RGR has plenty of upside surprises in it now that all the bad news is behind it.
But momentum is momentum, and after a big run, RGR’s momentum is downward. As for stock repurchases, RGR doesn’t have a lot of cash on hand to move into its buyback program at the moment. So, while its goal is admirable, its execution is unlikely.
RGR came out with earnings after close yesterday, but regardless of any Q4 boost, it’s best to avoid RGR stock for now. Sturm, Ruger & Company has been launching new models, which may boost Christmas sales, but many of the new models didn’t roll out until January, which pushes those sales to another quarter.
There are plenty of better stocks and stories out there to risk buying Sturm, Ruger & Company.
Container Store Group Inc (NYSE:TCS)
Sometime niches work, some times they don’t. Remember Just Lamps and Just Bulbs stores in New York City? Saturday Night Live parodied them many years ago.
Well, the modern analog is certainly Container Store Group Inc (NYSE:TCS), the parent company of The Container Store.
There was plenty of optimism when Container Store Group had its initial public offering in late 2013, hitting highs near the mid-$40s after an IPO price of $35 a share. But TCS has been a downhill slide from there. Container Store Group is off over 50% since its IPO, and there’s not much to slow down that slide.
Even at these levels, TCS stock is overvalued compared to its peers. Container Store Group registers price-to-earnings ratio of 31 at this point, while its contemporaries Bed Bath & Beyond Inc. (NASDAQ:BBBY) and Pier 1 Imports Inc (NYSE:PIR) are sporting P/Es in the mid- to upper-teens.
In TCS stock’s most recent quarterly report, same store sales are uninspiring, net revenue barely has a heartbeat and its best customer are only showing up four times a year. Avoid or sell TCS.
Tiffany & Co. (NYSE:TIF)
While RGR and TCS are more U.S.-focused plays, Tiffany & Co. (NYSE:TIF) is suffering at the hands of global issues.
But this isn’t a death knell for Tiffany, a venerable institution — it’s simply a pot hole in a very long road.
Remember, TIF sales have been largely been coming from a white-hot China and the newfound wealth in Asia. Well, a strong dollar hurts the value of those TIF sales, and now, those sales have begun to evaporate as China slows, Japan slogs, South Korea scrambles and the region hunkers down.
Tiffany stock lost 15% in just the last month after reporting weaker numbers. And what may be worse, insiders are selling large chunks of shares; that’s never a good sign.
Again, TIF will make it through — it’s found a way to muddle through for 178 years! — but there’s no point in getting involved with it at this point. However, Tiffany stock is certainly one to put on your buy list once global growth gains more traction.
Louis Navellier is the editor of Blue Chip Growth.