Contributions wanted for "consumer recession" trade

Discussion in 'Stocks' started by Cutten, Dec 20, 2008.

  1. Cutten

    Cutten

    Ok, I've had a version of this on for the last few months. The idea is that consumers will feel the pinch big-time, and this will lead them to go shopping at more bargain-basement places, whilst leaving the middle market and premium market in trouble.

    So far i've played it by going long WMT and MCD, and short stuff like TIF, JWN. Since the latter have moved down quite a bit in recent months, I am now looking for less obvious candidates on both the long and short side. Here are my selection criteria:

    Longs:

    Strong balance sheet (low debt)
    Low-end/bargain/discounter market segment (e.g. Wal Mart)
    Low costs compared to sector competition

    Shorts:

    High debt/weak balance sheet
    Premium mid-market, or high-end luxury market segment
    High cost-base

    Ideal short candidates would be in danger of bankruptcy in the next 1-2 years. Ideal longs would be best of breed businesses.

    I invite suggestions for stocks to put on for this trade.
     
  2. harkm

    harkm

    I honestly haven't done ANY research on this but just for brainstorming sake, Staples and all the office supply stores are just not necessary anymore. They seem to have way too much overhead for what they sell imo. They probably will ultimately close a bunch of stores and focus more on catalog sales imo.
     
  3. m22au

    m22au

    I think M has a fair bit of debt ... does it fit your definition of 'premium middle market' ?

     
  4. I think these ideas are a bit played out.
     
  5. Illum

    Illum

    JPM just bankrolled them