The Internet is the greatest price discovery mechanism of all time. Twenty years ago if you wanted to know the open market value of a good or service you either had to guess or spend a good deal of time researching other potential buyers and market forces. Now you just do a search or go on EBay (EBAY).
The consumer wins in the new world of transparent pricing but vendors and retailers lose. The easy money has disappeared, leaving only brand value and product quality as virtues for which companies can charge customers a premium. For long-term investors the trick is finding out which companies are capturing that extra margin in a world where knockoffs are the norm.
Brian Sozzi of NBG Productions joined Breakout to tell us which retail brands he thinks have the right combination of perceived quality and execution to make real money this holiday season and beyond. Sozzi has three clear favorites.
Historically, liking both of these stocks has been akin to being long both Cain and Abel; you were getting long two players in a zero-sum game. Times have changed. "Everybody seems to think you have to have one winner and a loser," says Sozzi. "I think both companies can win."
What makes him confident about UA are the company's high-end offerings and a lucrative partnership with Dicks Sporting Goods (DKS). The deal means UA has front and center positioning at the largest sporting goods chain in the country; positioning Under Armour uses to its best advantage with bright, high margin goods.
Nike is retaining its position throughout the pricing spectrum. Phil Knight's baby continues to hold dominate share throughout the pricing spectrum; appealing to customers regardless of the size of their wallet. NKE stock has been recovering from a sell-off on margin concerns earlier this year.
One of the most popular short ideas in the stock universe, this yoga apparel maker's stock continues to bend but never break. The shorts love it because of the high multiples and expensive store-based distribution model. Customers love the company because they make the best athletic wear extant.
As usual, it's about the margins. Lululemon is able to get customers to pay up because they manufacture better stuff. As a result the company shows surprising resilience in bad economic times. Sozzi says the traffic at LULU stores is "so-so" but there isn't any discounting. As long as the company protects the value of its brand and pleases customers, the shorts are going to remain frustrated.
- Investment & Company Information