Just want to say I lost about 45% on JILL this week. It is a small cap retailer that I had in one of my ports.
I notice something fishy … the stock dropped 12% the 5 days before the earnings (much more than the XRT). Then proceeded to lose another 35% on bad earnings.
So I digged deeper and asked a good hedge fund friend of mine. He told me that their guys collect retail data from credit card sales data and get some sort of store sales data on a weekly basis. He also told me running regression models on these sales data to predict earning beat/misses has a good success rate in some cases.
In his word, “trading retail stocks using stale fundamental data is asking to be pounded by the big boys”.
Nothing new here. Hedge funds are crunching all sorts of data to get a head start. Big data is here to stay and Renaissance guys have been using it for a long time.
Found the same thing in energy. Tons of research analysts gobbling up massive amounts of commoditized data. It’s hard to find inefficiencies in that space. And even then, most seemingly mispriced securities are value traps.
I think we just gotta deal with the fact that alpha decay happens. Assuming none of us has the secret magic bullet, the only way not to slide backwards is to continuously move forward and innovate.
but the earnings and revenues beat expectations. It was the 2018 outlook that spooked investors. They seem to have a problem with their website and inventory management, which both sound like problems which could be addressed. What bothers me more is that they have substantial long term debt after being spun off by a private equity firm. Sounds like Toys R Us.
I’m not a lawyer, so I don’t know the answer, but channel checks have been around forever. I’ve read accounts of investment groups doing helicopter flyovers of mall parking lots in order to gauge how the holiday shopping season was faring. Years ago a co-worker mentioned how many more Amazon boxes he would see in the neighborhood on trash day. It’s all part of the game.