The equity market has been expanding since early 2009 and may be on its last leg. It appears that the bull market is at the last stage of the economic cycle. Given the weaker economic outlook and cyclicality of the economy, the earnings from corporations may start declining from next year onwards. In that case, consumer cyclicals tend to underperform going forward due to the fact that consumers may delay the non-essentials during slow-downs. Once the economy starts shrinking, market prices of equities will start to decline. However, some of the non-cyclicals, utilities, and specialized retailers tend to fare well in not-so-great or declining economies. For example, many low-price merchandise sellers like TJ Maxx, Ross Store, and many dollar stores fared well during past economic downturns, while other company stocks took a beating. Rightfully, many customers change their buying habits when they feel less optimistic about the near future and focus on bargains in goods and services.
Here, I would like to introduce a fledgling and promising company, Five Below, which I own with my Covestor and our clients’ portfolios. If you have not heard about Five Below, I would not be surprised. It is somewhat like Dollar General Store, except that none of its items are priced more than five dollars. Continue Reading »