Is the retail apocalypse near?

Thursday morning... blue sky with a few clouds ... One of those crisp air mornings showing that life is so beautiful... A bit of sun cracking through the window warming up the whole room... I knew in a few hours the whole house will be filled with the smell of turkey roasting in the oven... butter... sage ... thyme... mmm.. mmm...mmm .... it was going to be a magnificent day... I rolled over and reached for my phone to check the time. Press the home button, swipe, turn off the 'night mode'...

Ding...Ding... Ding... Ding... Ding, Ding, Ding, Ding, Ding

What the what...? Why did I do this...? The emails are rushing in. Ding... ding... ding... the little refresh circle doesn't get a millisecond of rest... incoming emails... hundreds of them... what's so important? What's so urgent and why are there so many of them... the refresh circle is running fast ... uh oh, it's the day before Black Friday and America's retailers have no mercy ... deals after deals... the poor little refresh circle on my phone is running out of breath... downloading 498 Black Friday emails before it could even leave its night stand! Retailers are alive and sending emails! ​

​I shake off my turkey dreams...  sit up, out of the bed, looking at my computer... the investor mind takes over and asks: 'How many of these retailers do you think will be around the same time next year?' All these emails flocking in your mailbox on the day of turkey (pun intended) is a sign... a sign of a 'retail apocalypse'!

Retail stocks have been suicidal recently. So much so that some people in Wall Street are now making their demise into an investment fund. Even in this ever-growing stock market, retailers are sliding down the slope of charts with no apparent end to their dismay... From Target to Foot Locker... from Under Armour to Nike. If you've got a presence in the malls of America, you are not doing well. There are exceptions (e.g., Home Depot), but they are few and far in between. Everybody blames it on Amazon and the shift from offline to online. The Amazon effect is such a prevailing story that any retailer that grows in online sales gets a boost of confidence from investors. For example, Walmart just got a huge share price uptake after announcing how online commerce initiatives have been growing. So what does an intelligent investor do in this situation... jump in and buy every retailer which is appearing to hold up the battle against Amazon? Or, pick up some beaten down shares in the hope of capturing some value on its way up?

Nah! We are better than that! It's not only Amazon that is killing retail. Retail in America has two illnesses: 1) The burden of debt and 2) The acute oversupply syndrome. And any intelligent investor considering to invest in retail needs to make sure not to fall into the trap of the growing online sales or a Black Friday boost as a sign of strength.

• The burden of debt: in the aftermath of the financial crisis, retailers of all shapes and sizes took massive amount debt to survive. It was fine then because the interest rate was kept low thanks to the government. However, starting from 2017 and gaining momentum in 2018, it's been time for retailers to pay back their debt as those bonds are maturing. Because interest rates are now on the way up, most of these retailers will have a hard time refinancing their debt. Expect more bankruptcies coming up in 2018.
• The acute oversupply syndrome: you think going online is a sign of recovery by retailers and you are willing to pay top dollars for stocks such as Walmart and Target that have shown signs of eCommerce growth? Think again! The Unites States have 11X more retail space per 1000 people compared to Germany and 51X more than China, to name a few comparison. Expect more retailers to go out of business.

So on this Black Friday deal bonanza, we wanted to remind you, not to let the volume of deals and a few percentages increase in eCommerce sales fool you. We at Stock Card HQ are holding our horses to see what will happen to the retail sector as a whole before we buy or sell any retail stocks. We are keeping Under Armour and holding off to add any Walmart or Target stocks... Stay wise our fellow intelligent investors! Stay wise! 

Wrapping up the #FutureOfWorks investment theme
November was the month of the #FutureOfWork investment theme here at Stock Card HQ. In the past few weeks, we picked Adobe, American Towers, Splunk, Intel and Cognizant. Each has the capacity to shape how we will work in the future. From digital content creation to communications tower, data storage and servers, and finally to blockchain. As we wrap up the month of November, we are getting a new theme for December. Seize the opportunity and share your favorite investing theme. Some ideas we have are ready to explore such as the #FutureofPayment, the #FutureofEntertainment, or the #FutureOfHealth. That being said, we'd love to hear from you. Send us an email or submit a Stock Card request and let's find out what future-defining company is on your radar.

What's been on your radar?
As always, our community has been busy exploring new companies and stocks. Here is what has been on its radar in the past week. Click on the logo to go to the company's Stock Card:

That's it for this edition of Stock Card Weekly. Don't forget to join our Intelligent Investing Facebook Group for daily investing conversations and research.

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