Short Christmas

Written By Christian DeHaemer

Posted December 24, 2010

There is something about Christmas that just pisses me off.

I’m not sure if it’s the Toys “R” Us cashiers or the people in line in front of me who the cashiers have to deal with…


Or their managers who move with the speed of a sloth on ludes.

Perhaps it’s just the stench of decay and neglect in certain retail outlets. (Check out the cobwebs at Sears, pictured right.)

I bought a small TV yesterday from H. H. Gregg for $149.

The paperwork was worse than my first mortgage.

No, I don’t want to buy $70 HDMI cables. No, you can’t have my phone number. No, I don’t want the warranty. If it doesn’t work, I’m bringing it back.

Somewhere into my rant about watching a traffic light go from green to red five times before I could exit a parking lot, my colleague Nick Hodge told me he hasn’t gone to a retail store in months.

Heck, he said he even bought a mop on Amazon the other day — no taxes and free shipping.

Online boom times

More and more people are buying online. In fact sales are up 42% this year over last.

Granted, 2009 was a dismal year for retailers; but what is interesting is that online retailers are out-performing bricks-and-mortar places.

Electronics are the biggest sellers online, which helps companies like Wal-Mart (WMT) and Amazon (AMZN). This explains why online sales average $165 versus $115 for the mall.

Retail figures quoted by UPI claim that this year’s shopping season is on track to be the healthiest in four years.

So seems to reason you should rush out and buy stock in (AMZN), right?


Short the river

Here is a five-year chart of Amazon.

As you can tell, four out of five years the stock sells off after Christmas. The one year it didn’t sell off was the one year it fell during the bloodbath of 2008…


Amazon has a market cap of $82 billion and quarterly revenue growth of 38.70% (year over year). Gross margins are 22.71%. Net income was 2.47 over the last twelve months.

On the other hand, eBay has a quarterly revenue growth of 0.50%, a market cap o $36.99 billion, a P/E of 14.47, and gross margins are at a whopping 71.96%.

Sears (SHLD) has a market cap of 7.4 billion, quarterly revenue growth of -5%, margins of 27%, and a P/E of 40.

Most of these retailers — including those like AutoZone (AZO) — have had terrific run-ups over the past year as investors bought them cheaply in anticipation of a return to growth (OK, not Sears).

And as such, you should sell them into fourth quarter earnings.

For the more adventurous, I would recommend buying puts six months out on Amazon when the MACD crosses over. I expect that this will be around January 22 when they announce earnings.

I hope you have an enjoyable holiday season.

chris sig

Christian DeHaemer
Editor, Energy & Capital

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