Updating The Performance Of An Urban-Centric/High-End Retail Portfolio

by: SA Editor Rocco Pendola

About two months ago, I started making the case for several stocks that tend toward serving or stake their claim to success on upper-middle to high-end consumers and citizens. Lots has happened as I have been weaving together this story of urban-centric, upper-echelon consumption.

In terms of my bullishness, the July quotes only apply to Saks (NYSE:SKS), Coach (NYSE:COH), Nordstrom (NYSE:JWN), Lululemon (NASDAQ:LULU) and Whole Foods (NASDAQ:WFM). By and large, the market correction took each of those names down with it, but all appear to be on the rebound. And that's because the long-term story for each company remains intact.

As July turned to August, I added several of the other retail names, particularly Ralph Lauren (NYSE:RL), Tiffany (NYSE:TIF) and Williams Sonoma (NYSE:WSM), to what we'll just call my high-end retail/urban-centric portfolio. Apple (NASDAQ:AAPL) and UDR, Inc. (NYSE:UDR) became attractive during the downturn. I include July quotes for these stocks to give the complete picture of each equity's recent trajectory.

If you go to my article history page on Seeking Alpha, you can review what I have written on each ticker to see my bullish case for each stock and/or the sector it runs in. I remain bullish on each of the companies listed in the following chart:

Stock Friday, July 1 close Friday, July 8 close Friday, July 15 close Friday, July 22 close Thursday, Aug 11, close Monday, Aug 29, close
Saks (SKS) $11.41 $11.56 $10.99 $11.37 $8.70 $9.74
Coach (COH) $65.99 $66.82 $65.48 $66.80 $52.87 $55.87
Nordstrom (JWN) $48.24 $50.25 $50.44 $51.50 $42.33 $44.70
Ralph Lauren (RL) $134.30 $137.61 $134.77 $139.39 $130.55 $135.60
Tiffany (TIF) $79.40 $82.30 $81.88 $82.91 $67.68 $71.52
Williams-Sonoma (WSM) $36.39 $38.09 $38.01 $38.81 $32.17 $33.67
Lululemon (LULU) $57.81* $60.12* $60.54 $63.44 $53.83 $55.24
Whole Foods (WFM) $64.41 $64.36 $64.52 $66.13 $57.44 $64.29
Apple (AAPL) $343.26 $359.71 $364.92 $393.30 $373.70 $389.97
UDR, Inc. (UDR) $25.10 $25.58 $25.98 $27.14 $24.38 $26.28
Click to enlarge

*Adjusted close for LULU 2-for-1 split on July 12, 2011.

Every stock on the list took a beating into August. With the exception of RL, AAPL and UDR, each stock has a considerable amount of room to appreciate before touching its July 1 closing price.

As I have shown with my $10,000 portfolio and the Short Portfolio That Wants to Be Long, you can use options to capitalize on strong stocks that will rebound nicely not simply on the back of a rally, but as part of the group that leads it. I continue to believe that a short put or bull put spread strategy makes sense on each of these names.

On relative high-flyers such as AAPL and RL, it might make more sense to write spreads because the margin requirements on naked puts are steep. On a lower-priced stock like SKS or UDR that you would like to (A) generate income on and (B) establish a long position in on a pullback, writing naked puts could make more sense.

At day's end, your account size, tolerance for risk and options/investing experience dictates the route you will take, if any.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: I may open and close positions, most likely using options, in any of the stocks mentioned in this article at any time.