Why I Love Amazon.com but Won’t Buy It

Why I Love Amazon.com but Won’t Buy It

You should look at your portfolio and want to throw up a little — this is how one value manager described what a true, die-hard value investor’s portfolio should look like. The two stocks I wrote about in my latest article — American Eagle and Aéropostale — have a tendency to elicit that unpleasant reflex in many investors today.

I’m not writing this article as a pitch for those stocks (though, to be clear, my firm does own them) but to reinforce the lesson I have learned from past indecisions. If you want to buy a retailer selling clothes and shoes — items that are subject to fashion and weather risks — you want to buy them when they have missed their latest trend, when their financials look ugly and when the risks have already played out. One thing I like about these apparel retailers is that teens will shop there for just a few years. If a retailer screws up with one crop of kids, they get a second chance, because there is another crop coming right along. (The JCPenney crowd is not as forgiving. See “What I Learned from the JC Penney Fiasco.”)

Also, unlike for the Best Buys and RadioShacks of the world, the Internet is not a significant threat to teen clothing retailers. Parents get sick of their kids driving them crazy at home on weekends — plus, let’s be honest, when your kids get to be teenagers, you are definitely not cool anymore. There is, however, an amicable solution: Drop the kids off at the shopping mall — a large, relatively secure enclosed space with video cameras and security personnel, with a movie theater, inexpensive fast food and a lot of retailers.

Continue reading on Institutional Investor….

 



About the Author

VitalyKatsenelson
I was born and raised in Murmansk, Russia (the home for Russia’s northern navy fleet, think Tom Clancy’s Red October). I immigrated to the US from Russia in 1991 with all my family – my three brothers, my father, and my stepmother. (Here is a link to a more detailed story of how my family emigrated from Russia.) My professional career is easily described in one sentence: I invest, I educate, I write, and I could not dream of doing anything else. Here is a slightly more detailed curriculum vitae: I am Chief Investment Officer at Investment Management Associates, Inc (IMA), a value investment firm based in Denver, Colorado. After I received my graduate and undergraduate degrees in finance (cum laude, but who cares) from the University of Colorado at Denver, and finished my CFA designation (three years of my life that are a vague recollection at this point), I wanted to keep learning. I figured the best way to learn is to teach. At first I taught an undergraduate class at the University of Colorado at Denver and later a graduate investment class at the same university that I designed based on my day job. Currently I am on sabbatical from teaching for a while. I found that the university classroom was not big enough for me, so I started writing and, let’s be honest, I needed to let my genetically embedded Russian sarcasm out. I’ve written articles for the Financial Times, Barron’s, BusinessWeek, Christian Science Monitor, New York Post, Institutional Investor … and the list goes on. I was profiled in Barron’s, and have been interviewed by Value Investor Insight, Welling@Weeden, BusinessWeek, BNN, CNBC, and countless radio shows. Finally, my biggest achievement – well actually second biggest; I count quitting smoking in 1992 as the biggest – I’ve authored the Little Book of Sideways Markets (Wiley, 2010) and Active Value Investing (Wiley, 2007).