These are treacherous waters for individuals and institutions to navigate, says Andrew Horowitz, who tells MoneyShow.com’s Kate Stalter about some of the growth companies with unique offerings that are worth a look right now.
Kate Stalter: We’re talking today with Andrew Horowitz, of Horowitz & Company in Fort Lauderdale, Florida. Andrew is also the host of the popular podcast, The Disciplined Investor. It’s great to be talking to you today.
Andrew Horowitz: Hey, thanks, Kate. Great to talk to you.
Kate Stalter: What’s your take on the current market conditions these days, and what do you think individual investors need to know about right now?
Andrew Horowitz: It’s a mess. Unfortunately, the long arms of the government are involved in almost every aspect of the markets, I think more so than I remember in decades.
And individual investors will get pushed around, just like institutions will right now, because there is so much of a heavy hand involved in currencies, which translates to commodities.
And then there are so many things that are halfway done, whether it’s the potential for stimulus or not, or the debt ceiling or not, and the issues in Europe, and then the rhetoric from all of the different Fed chiefs out there, around the world. It’s a very confusing time, I think, for investors.
Kate Stalter: Given all that, what do you see showing strength at this moment?
Andrew Horowitz: Good question. Right now, the big issues that we see are going after companies that have really solid balance sheets. There are a lot of them out there; they aren’t very difficult to find.
Good growth opportunities that are possibly in a little bit of a niche market. The big issue here is that we want to find companies that have had a history, through much of this turmoil, that are looking as if they have a continuation of that opportunity.
And companies that have a global footprint. Because right now every company we’ve seen report over the last six months or so has said that the US markets are weak, the European markets are weak, but the emerging markets—inclusive of Asia and Latin America and around the world, other than ex- US, ex-Europe—are really doing incredibly well.
Kate Stalter: So, you’ve kind of answered this a little bit, talking about the weakness in the US and Europe, but what are some sectors or industries that you think individual investors should really steer away from right now?
Andrew Horowitz: Steer away from? Oh, I think the financials. We have not liked the financials for some time, and I think the financials are so convoluted with their current books, and the bookkeeping, and oversight from the Fed, that it’s just a very difficult thing to deal with.
I think you need to stay away from some of the bonds. You need to change your portfolio a little bit if you have bonds, because if there is no QE3, 4, or 5 coming, the bonds are going to be sold pretty significantly.
And I think that the situation in Europe—banks in Europe in particular—and some companies that make most of their money from the European area, that's a problem. So that’s the area you want to stay away from.
Finally, the other area that you want to stay away from is low-end retail, like Wal-Mart (WMT), or Target (TGT). They may not be low-end, but the lower end, as opposed to—and this may sound very strange—the higher-end retail, Fossil (FOSL), or Lululemon (LULU), Tiffany (TIFF), Coach (COH).
There is, if you think about it, a very big world out there. As the dollar has been coming down in value so significantly, it’s almost like everything is on unbelievable sale right now for much of Asia.
I just came back from Japan. I was looking at the prices of some things. I said, “You’ve got to be kidding me.” But when they see our prices, they also say, “You’ve got to be kidding me,” but from a different angle. Much cheaper for them.
Kate Stalter: So, what are some of the investments that you are putting clients into these days, Andrew?
Andrew Horowitz: On the individual stock side of things, we like companies like Fossil. They make watches and we’ll call it higher-end jewelry.
Lululemon, which is a company that is involved in athletic gear for women, and actually is spreading out. Unbelievable growth going on there. A terrific balance sheet. For whatever the reason, and whether you like to get involved in yoga and working out or not, they almost have a cult-like following.
Something like a Glu Mobile (GLUU). One of the big things happening right now is, there is a real trend towards mobile gaming, through iPhones and iPads and also through tablets, the Android system. And what’s happening is, only a few companies that are publicly traded right now have any footprints in this area.
When we look at what’s about to happen in terms of an upcoming IPO, a company called Zynga—which makes Farmville, and they make Mafia Wars, and they have a poker game—they’re making money hand over fist. So, we went out to try to find another company that would be similar to that.
What we found was a company called Glu Mobile, which develops mobile gaming. They are a small company, up-and-coming, and they are making a World Series of Poker game. If anybody has an iPhone or an Android system, you should just look at the graphics and how beautiful it is.
They make money through advertising. They make money through development.
And as these kinds of companies come up, this is a company that people can buy as a pure play on mobile gaming right now—and it’s done terrific. It’s up close to 100% in the last six months or so, and as we see the continuation of mobile gaming growing, this is a company that really has an opportunity.
Shoe companies. Through all thick and thin, through the worst of the worst of times, amazingly, shoe companies have done extraordinarily well. Have you noticed that?
|pagebreak|Kate Stalter: They have. That’s true. You’ve had Deckers (DECK) and a few of the others over the past few months.
Andrew Horowitz: One of the ones that we like, one of the ones we hated for a long time—that we really kiboshed back in 2007 and 2008, is Crocs (CROX). Crocs has a brand-new series of shoes that look less like Crocs than you would think, and more like Topsiders or sneakers but using still the similar fabrics and materials.
They also have a brand-new line for kids called the Chameleon. Kids love the little Jibbitz. They love the little things they have on them.
You’ve seen the kids that run around at the malls and they have the lights that light up on their sneakers. Well, this shoe is a Croc that actually turns color, depending on the light outside and inside, and it goes from white to purple and purple to white.
You and I may say, “Big deal,” but when you have your kid pulling on you saying, “Mommy, Mommy, I want you to buy that for me! That’s so cool!” Alright, so you get that.
The stock has been doing very well. Their outlook is very positive, and it is really possibly an undervalued story right now compared to where it can be.
They also have a line of boots they’ve come out with to semi-compete with Deckers, so you have that.
And then there are companies like Perrigo (PRGO), a generic drug manufacturer we like. They are one of a few that have a great story to tell, a great continuous ongoing revenue stream.
The stock recently broke out, even with all the things that are going on, because health care is a defensive play and nobody is getting any younger and the amount of drugs they are using for treatment to all sorts of ailments are growing on a continual basis. So people want the generic version. So, that’s a big thing.
Finally, we’re looking at shorting the yen through the Proshares UltraShort Yen ETF (YCS). It’s a double inverse.
We just wrote a piece on our blog and in our quarterly commentary about how we believe that the time has come to realize that Treasuries and long-term bonds are not going to be staying this low, in terms of rates, for much longer, for a lot of different reasons. So we’re actually shorting the 20-year-plus.
You can either short the 20+ Year Treasury Bond Fund (TLT) or you can go long, if you’re in an IRA or something, on the UltraShort 20+ Year Treasury (TBT), which is the short version of that.
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