Where has all the newfound cash gone?
We have the answer.
Here’s where to find it—and more importantly, how to trade it.
The location of the newfound cash is the grand question plaguing Wall Street analysts picking apart recent sales and earnings data from retailers…
Income is up, average hourly wages are up, employment is up, consumer confidence is steady. Yet retail sales are sluggish to lousy, and the weather can only explain part of the slowdown in growth.
This has the analysts really worried about Black Friday and holiday spending.
Wow, they could end up being even more out of touch than they have been the past few years. Imagine that.
They also have others prepare food for them. Somebody else makes their travel arrangements, too. Many live in big cities. They use Uber, and only pull their luxury cars from their garages once in a while. They have Cadillac health insurance plans and never worry about the cost of physical therapy or a root canal.
This is where the consumer dollar is going: Food, travel, cars and health care… and, of course, Apple (AAPL).
Wall Street is missing a great deal of this and giving individual investors a great opportunity to get ahead of them before they wake up and smell the coffee… on board a cruise ship… after being driven to the ship in a new crossover… the day after receiving physical therapy… that they scheduled on their iPhone 6.
What should the individual investor look at? What to do?
Let’s tackle the “what to do” part first…
Given market conditions, if you keep reading and like what you read, do not plunge in. Sell a put (yes, sell, not buy) to get a discount to the market. Or, if you do buy, turn around and sell a call to reduce your cost basis.
Listen, the market is a little jumpy—generate some cash from all this uncertainty.
The big question is this: What companies merit this attention?
Here are the top 10 for this supposedly mysterious holiday spending season.
Whole Foods Market (WFM) has been cut in half, and with some merit, as sales growth is well below historical norms.
Make like a contrarian and buy WFM. The company will open new, small-format stores in the second half of 2016. The stock is around $30. In a couple of years (maybe three), it could be back to its all time highs near $60 if Wall Street sees any success in the new format stores.
The other name in this sector is where you smell the coffee: Starbucks (SBUX). The preeminent fast- and customized-food stock of millennials. The stock is circling $60. It could circle $90 in 4-6 quarters.
The 8,000 (not 800) pound gorilla that benefits from overall increases in demand for travel is Expedia (EXPE). It has sold off a bit and is in the low $120s, but could see $165-$180 in a year.
The airline most likely to see its stock move in 2016 is American Airlines (AAL). It could double in 2-3 years.
One name stands out: General Motors (GM). It’s undervalued, with incredible premiums on the puts and calls, if you choose to sell options. The stock sells around $35, but it’s worth $45.
There is serious growth in health care utilization due to the Affordable Care Act (ACA).
The way to play the angle of lower budgets (Medicaid or lousy insurance plans) is through the mass market—that means CVS Health (CVS).
CVS’s expansion plans for mini-clinics and their all-out effort to supply day-to-day health care and related products is under the ACA.
Those with chronic illnesses such as hepatitis C can now get fairly priced health insurance. That means the great provider of the hepatitis C cure (not treatment; for 90% of people, it’s a cure) is Gilead Sciences (GILD).
Gilead is the most undervalued stock in the S&P 500, the best biopharma company on the planet, and most seriously misunderstood on Wall Street.
A category all its own…
Apple (AAPL) is the most valuable brand and the most successful computing and telephony hardware company in the world.
Wall Street continues to undervalue this company and measure the impact of people spending money on Apple products, and how that money is diverted from other retailers.
Since Apple is at the heart of mobile computing, take a look at our tenth stock, Dycom (DY).
Dycom builds out the infrastructure used by cable, telephone and related outfits that provide the backbone for mobile this and that, and, of course, video streaming.
(Michael Shulman owns shares of SBUX, EXPE, RCL, GM, CVS, GILD, AAPL)
This post originally appeared in mainstreetinvestor.com.