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Trifecta Stocks

Trifecta Stocks Weekly Roundup

By Chris Versace and Bob Lang | 11/27/15 - 11:44 AM EST

Welcome to your post-Thanksgiving Trifecta Weekly Roundup, which also happens to coincide with Black Friday, the official kickoff to the holiday shopping season.

Like us, you may be recovering from too much turkey and pie, you may be lining up to take part at some door-buster -- or as Donald Trump would say, "huuuuge" -- holiday sale, or you may even be shopping online, which we continue to see as the big winner this year; hence, our positions in United Parcel Service (UPS:NYSE) and MasterCard (MA:NYSE). More than a few got a jump on online holiday shopping yesterday, with Adobe Systems (ADBE:Nasdaq) reporting $1.1 billion was spent through 5 p.m. ET Thursday. That sure makes us feel good about our two online shopping plays, almost as much as the October Durable Orders report did about our Boeing (BA:NYSE) shares thanks to a strong pick-up in nondefense aircraft orders.

Taking a step back and looking at the broader Trifecta portfolio, we enjoyed several moves that outperformed the essentially flat action in the S&P 500 over the last five trading days. Those included CVS Health (CVS:NYSE), Foot Locker (FL:NYSE), Harman International (HAR:NYSE), Qorvo (QRVO:Nasdaq) and VF Corp. (VFC:NYSE). We had no additions to the Trifecta portfolio this week, but rest assured we are rolling up our sleeves as we head into December to position the portfolio for 2016, which also means adding to the Trifecta Bullpen.

Macy’s (M:NYSE) CEO Terry Lundgren made two interesting comments that caught our ears when he appeared on CNBC this morning. The first was the unseasonably warm October weather has continued into November, making it the warmest November in 250 years. To us this means those retailers that have struggled with demand for seasonal items in October likely have continued to so in November. We’ll continue to watch what this means for our VF Corp. shares, which have rebounded nearly 8% since mid-November.

Second, Macy's Lundgren commented that shoppers are getting big bargains this holiday season, which on the one hand speaks to retailers needing to move excess seasonal item inventories due to the warm weather. On the other hand, it jibes with the weaker-than-expected October Personal Income and Spending Report earlier this week that showed consumers continue to underspend relative to expectations in favor of saving. To us, this means consumers will continue to search out deals and value this holiday season, which reinforces the reasons why we added Costco (COST:Nasdaq) to the Trifecta portfolio. So far we haven’t seen any E. coli-related weakness in the shares, but we would look to such weakness if it emerges as an opportunity to add to our position.

Today the market has shortened trading hours as it closes at 1 p.m. ET, which means stock volumes as well as news flow will be light -- a brief respite ahead of next week’s data deluge. Early next week we will start to see estimated tallies on the holiday shopping weekend as we close out the month of November and enter December. The monthly transition means we will see the usual swath of economic data coming our way, including manufacturing data from ISM and Markit Economics that will offer insight into November activity and orders patterns as well as November job creation. We’ll drill down here as part of our regular monitoring of data for our Danaher (DHR:NYSE) and Illinois Tool Works (ITW:NYSE) positions, and to get a bead on the latest data that will influence the Fed ahead of its Dec. 15-16 Federal Open Market Committee meeting.

Keeping an eye on the data that the Fed likely will eyeball ahead of the FOMC meeting means digging into next week’s Fed Beige Book report, which collects anecdotal economic commentary from the various Federal Reserve banks. Rounding out the big pieces of data the Fed will be watching next week is the November Employment Report. Aside from the headline figures of job creation and the unemployment rate, we’ll be checking out average hours worked, wages and the degree of revisions in the number of jobs created during the last two months following the big upside surprise in the October report. Given the seasonal ramp headed into the year-end holidays, we suspect more part-time and seasonal jobs were added in November that could lead to a strong headline jobs figure. However, let’s remember those jobs tend to disappear soon after the holiday shopping season.

These reports will be the last ones ahead of the December FOMC meeting, and, in a replay of events reminiscent of the movie "Groundhog Day," we expect the market once again will be all over them in an effort to determine if the Fed will boost interest rates after that meeting. We, too, will be updating our view on whether the Fed will make a move, but heading into next week we remain skeptical.

Also on tap next week is November auto and trucks sales, which will shed some light on how the quarter is tracking for Harman International. From an earnings perspective, our Ulta Salon, Cosmetics & Fragrances (ULTA:Nasdaq) will report its quarterly results next Thursday, Dec. 3. ULTA shares have rebounded sharply since mid-November, and we continue to like them as we march deeper into the holiday shopping season. We’ll have an earnings preview for the company next week.

Because of the limited market action during the Thanksgiving holiday week, we will not be including individual rundowns on the Trifecta stocks (although we touched on many of them in the commentary above). So, enjoy the rest of your holiday weekend and we’ll be back next week with more on what’s shaping the portfolio while also highlighting additional opportunities to put some of our cash to work.

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