Skip to Content
scroll

Does MM like the smaller retailers at the moment?

Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.

The Latest Q&A

Question asked

Does MM like the smaller retailers at the moment?

Hi guys, Thanks for your analysis and the answers to my previous questions. In the last few days, retailers have been hit hard. Some, in the smaller size of the spectrum like Baby Bunting, have slumped more than 50% from their previous peak. Is the market being over-pessimistic? As markets look ahead, what are the signals you normally pay attention to in order to consider re-entering or start accumulating in that sector? And which stocks are your preferred ones? Thanks, Angela

Answer

Hi Angela,

As we head into June and investors consider targets for tax loss selling we would be reticent to catch this particular falling knife:

  • With the “mortgage cliff” looming combined with a potential recession we are in no hurry to buy discretionary retailers.
  • The overall indices both here and in the US are avoiding the small caps i.e. a classic signal of a weak/unsettled market.

Specifically, we see no reason to buy BUB at this stage of the cycle with the stock down over 75% from its 2022 high.

Generally, we like to buy the stronger stocks that are dragged down in sympathy with a weak sector or theme. We start accumulating when either we see deep value &/or a catalyst emerges which makes us believe the sector has bottomed.

chart
image description
Bubs Australia Ltd (BUB)
image description

Relevant suggested news and content from the site

Back to top