The New Frugal is a secular change in shopping trends in the US and is altering of spending habits consumers. It began during the crash and the Great Recession and it is not the simple observation of “people spending less.”
People are spending less overall, in real terms, but they are spending more on fewer items and being more selective where they spend, basing their decisions on customer service and the reputation and perceived quality of a brand and it’s products.
The New Frugal Translation: Less “stuff” at Wal-Mart (WMT) or J.C. Penney (JCP) or similar chain stores and with the saved cash they are buying a special gift from Coach (COH) or Ralph Lauren (RL) or Saks (SKS) or Nordstrom (JWN).
And Apple (AAPL).
I left Apple for last because if you want to play retail for the holidays, play Apple.
Everyone writes about Apple but few discuss the company as the world’s pre-eminent retailer – more than $5,500 in sales per square foot and the “big” holiday gift this year. And last year. And next year.
If you take a look at the three year chart for Apple (see below) you can see investors and traders run the stock up after Q4 earnings are announced in late January. This is not just proof of my point on holiday sales, it is also proof Wall Street analysts and money mangers really are grossly overpaid.
So do what is easy to do – get ahead of Wall Street.
AAPL has been holding firm above $360 the past three months, as shown in the chart below, so you have little downside risk and big time upside not because it is the world’s number one consumer brand, number one tech company, maker of the most popular smart phone, owner of the tablet market, largest music distributor in the world or fastest growing computer manufacturer.
The upside comes from the American Consumer and the new era of the New Frugal.
Buy AAPL and sell calls against your position – sell them every week or month and you have a 15%-18% dividend. That is my approach.
Not your preference? You can own AAPL not with stock but long term calls – LEAPs – they are available through January 2014.
Nervous about the market? Sell some puts. But do something. It’s the New Frugal.
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