captainccs

Shorting the Double Dip

Suppose consumption drops by 25%, that does not mean that all businesses that supply this market lose an even 25% of revenue and it does not mean that the bottom line also falls by 25%.

As consumers run out of discretionary spending power they change their buying habits, they might switch from Whole Foods to Walmart, or from JC Penney to Ross Stores. The businesses themselves have tightened inventories and have taken other defensive measures to improve margins.

As investors we need to avoid the me-toos and the also-rans. There are plenty good retail stocks to invest in.