In 2011, I proffered the notion that stocks that somehow cater toward higher-end, urban audiences would perform well.
I argued that, under somewhat uncertain economic times, the upper middle class and above would feel less of a pinch than those with less secure employment and not as much, if any, disposable income to spare. Although the anti-city crowd likes to debate the issue, there's no doubt that urban cores in places like New York, San Francisco, Chicago and even Los Angeles pack in people with means, ranging from empty nesters to young, hip urban professionals and Richard Florida's Creative Class.
Stroll through key neighborhoods in the above-mentioned cities as well as smaller ones like Portland and Denver and you'll find the urban hipster; finance, biotech, tech and artsy types; new families; and older folks you would love to have as parents regularly spending cash, and plenty of it. Whenever my wife and I get lucky enough to be out walking the streets of Santa Monica or San Francisco by ourselves past 10 at night, we marvel at not just the number of people, but the composition of folks eating or waiting in line at restaurant after restaurant.
We're both around 40. These places, however, are packed with empty nesters who are much older than us and people considerably younger who have yet to pop out a litter. They drive the economic engines of retail and real estate in key urban places.
Over the summer, I started assembling a basic list of stocks I thought would do well on the basis of this theme as well as the trend of wealthy foreigners spending money at home and when they travel abroad to places like Manhattan.
Consider how things look more than six months later.
|Stock||Friday, July 1 close||Monday, Aug 29, close||Friday, Jan 20, Intraday|
|Ralph Lauren (NYSE:RL)||$134.30||$135.60||$146.26|
|Whole Foods (NASDAQ:WFM)||$64.41||$64.29||$76.22|
|UDR, Inc. (NYSE:UDR)||$25.10||$26.28||$24.50|
*Adjusted close for LULU 2-for-1 split on July 12, 2011.
With the exception of TIF and, to a lesser extent, SKS, the luxury retailers slid shortly after I threw my weight behind them, only to bounce back nicely from their late summer lows. RL, WFM and AAPL have all performed incredibly well, more than making up for losses in UDR and weakness in the somewhat volatile retailers.
While I still remain bullish on the overall urban/high-end theme, I would step back from supporting the legacy, upper-echelon retailers. At the same time, RL, LULU, WFM and AAPL remain buys. Even though UDR has underperformed, I still believe in the REIT's decision to shed many of its suburban properties for an urban focus, particularly in the Manhattan apartment market. I think that approach will pay off over time.
Disclosure: I am long AAPL.