I have been doing some portfolio pruning of late, and have decided to drop two stocks from the Puget Investor Portfolio.
Nordstrom (JWN) has been a long time holding that I finally decided to drop altogether. Last year I wrote about my concerns about Nordstrom, and why I unloaded most of my holdings. The thesis from last year remains – Amazon is going after clothing retailers, and I don’t want to bet against Amazon. When I saw that Amazon has come out with the Echo Look Style Assistant, I knew it was time to fully abandon my Nordstrom position. The Echo Look appears to go after the young fashion conscious consumer that would shop at Nordstrom – and I don’t know if Nordstrom has an answer for that.
Last week Nordstrom’s announced it was considering going private and the stock bounced a bit. An interesting development, but I am not sure if that is the answer. But I wish them good luck.
One related interesting stat I heard regarding retail. Because brick and mortar retailers have such high fixed overhead – if online takes just 25% of the traffic from stores, the store cannot survive. Most retailers are operating under such tight margins already, even a small drop-off in traffic could have painful consequences. Something to think about.
My reasoning to drop Hooker Furniture (HOFT) was a different story. I originally bought HOFT a couple years ago while perusing AAII‘s model portfolio of cheap, small cap stocks. After looking at a few of these stocks, I opened a small position in several of the stocks that looked like they had decent business models. As is often the case, this strategy had mixed results, some stock had done well – some did not. At the time Hooker was amazingly cheap – price to book around 1, little debt, flat to growing revenues. Seemed like a no-brainer, so in March of 2016 I picked it up around $32. It soon got cheaper, for no apparent reason (my thesis was still intact), so I picked up some more at $25. I was beginning to sweat my decision as the stock went no where for months, but I held on, and suddenly this month it surged to $46 on decent earnings (who new.. millennials are buying furniture!). Since the stock no longer is dirt cheap, and I am not a big bull in the growth of home furnishings, I decided there is no reason for me to keep this. So I am out.
I still have a couple stocks from my foray into the AAII model portfolio, Rocky Brands (RCKY) and Ultra Clean Holdings (UCTT). I am going to have to make a decision soon on these stocks also, as these have started to move up and I am not sure I can call them cheap anymore. Either come up with a new thesis, or drop them.
I am re-evaluating how many individual stocks I should own, so I may not replace these stocks with new holdings. I may go back and look at other AAII Model Portfolios for ideas, or just add to existing positions.