There's much more to being a contrarian investor than simply loading up on a portfolio of losers. Making intelligent counter-intuitive picks means connecting widely known factual "dots" in a way that makes a logical, if seldom considered, investment thesis. So it was with great interest that I watched Breakout guest Todd Schoenberger of LandColt Trading run through some of the all-too hyped "headwinds" facing equity markets to arrive at an unusual basket of stocks.
First the facts:
*80% of public corporations reporting in Q1 beat estimates, versus a long-term average of just over 60%. Meaning companies are beating even the traditionally sandbagged numbers through good margins.
*By no account are corporations hiring in droves. Indeed as evidenced by Cisco's (CSCO) announcement last week that they'd be laying off some 13% of their workforce. Companies have gone from trimming fat to chipping away payroll bone.
*Oil prices are somewhat off their highs but still pushing $100 a barrel.
*The American consumer, the best consumer in the world, is cutting back and increasingly opting for "staycations."
Add it up and what does Schoenberger like? Hotels, airlines and big oil. Not as shorts, but longs. Stay with me for a second as the idea isn't as crazy as it seems... not quite, anyway.
The theme is that corporate America, at least what's left of corporate America, is sending their workers into the field to visit clients in increasing percentages. "Nothing beats face to face," he says, looking me in the eye in a disquieting way. Schoenberger thinks the sweetspots for this theme are the middle of the pack names catering not to the highest or lowest end, but to business travelers. Companies such as Southwest (LUV), Hyatt (H) and Marriott (MAR) are taking advantage of the road warriors with reasonable prices, business suites, and moderate-amenities that make life on the road slightly more palatable for the travel warrior.
Does that mean the leisure/ family set? Good heavens no, says Schoenberger, recoiling in horror.
Todd's last ideas are more conventional. He likes the biggest of Big Oil in the form of Exxon Mobil (XOM), Chevron (CVX) and ConocoPhillips (COP). Controversy? Forget about it. Strategic Petroleum Reserve releases? Pffft. Humans barely make more oil than we consume which means eventually, despite the periodic complaints from DC, America is going to have to allow an increase in domestic drilling. In the meantime these tremendously well run companies are more or less indifferent to waiting for the right to explore and drill; they're simply too well run and make too much money the way things are.
If you're hoping for shiny, happy economic comeback stories look elsewhere. If you're looking for a place to park your portfolio and perhaps even benefit just a little bit from the slowest of slow growth environments, these are some ideas to consider.
- Exxon Mobil
- corporate America
- Good heavens
- Strategic Petroleum Reserve
- the road warriors