Key insights
- The author is rotating out of energy stocks after a 50% gain, citing oversupply concerns and negative sentiment. They are now focusing on retail stocks like NKE and LULU, which have been heavily impacted by tariffs. The author believes a change in tariff policy could be a positive catalyst, and the stocks' low P/S ratios present attractive entry points. This contrarian approach suggests potential upside for select retail names if tariff pressures ease.
In December, with oil at a historically very low level of $56/barrel, I was adding to energy positions like CVE. Sentiment at that time was particularly bad, with oversupply and narratives that it was an "old industry" and that those stocks were dead money. Today with those oil positions up roughly 50% in 3 months I am trimming my energy holdings in search of the next detested sector by the market.
Now my focus is Retail stocks, particularly NKE and LULU. These stocks have been absolutely decimated in large part due to negative headwinds driven by Tariffs. Nothing in this world will last forever and neither will the Tariffs. A simple change in foreign policy surrounding Tariffs would be a big catalyst upwards for these names. Both names are down +70% and trading at low P/S ratios not seen in over a decade. Now detested by the market so heavily, they are finally showing good entry prices to get into these names.
Thoughts?