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.

 

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