Discount stores

Esplanade bullish Kravetz on casinos, Apple; sees turmoil for discount stores


NEW YORK (Reuters) – Heavy holiday spending by U.S. consumers will not boost retailers across the board, but rather benefit winners like Apple Inc AAPL.O who have signature products, Esplanade Capital’s Shawn Kravetz said at the Reuters Global Investment 2019 Outlook summit in New York on Wednesday.

Shares of the iPhone maker slipped 3% at midday on Wednesday, sending them down more than 20% from their recent highs and into a bear market.

Still, Kravetz said he bolstered his position at Apple on Wednesday morning because the company was expanding its reach to recurring services and add-ons that don’t depend on iPhone sales growth.

“We know it’s not a Facebook or Google with blistering growth, but we’re not paying for it,” Kravetz said, referring to Apple’s price / earnings multiple of 15.8. At the same time, Apple is less likely to be subject to regulatory scrutiny over data usage than some other Silicon Valley giants, he said.

“It wouldn’t shock me to see its peers drop 20 percent as Apple recovers,” he said.

With Apple, Kravetz said he had increased his positions in casino stocks. He believes the massive sell-off that has driven the sector’s stock prices down by about a third this year is an overreaction to concerns about growth in China and other emerging markets.

His fund strengthened its positions in Caesars Entertainment Corp. CZR.O, manufacturer of casino video games International Game Technology PLC IGT.N and Penn National Gaming Inc PENN.O this year, he said, in part because of the steep drops he called “an absolute giveaway.”

“We don’t think the casinos will be a canary in a coal mine” that signal a recession to come, he said. Instead, “we think we’ll see more mergers and acquisitions as the leaders try to grow and consolidate some of their power,” he said.

Kravetz said strong consumer spending, driven in part by low unemployment rates and rising wages, will not translate into widespread gains at retailers due to rising costs as businesses try to keep up. fast and free shipping launched by Amazon.com Inc.

Discount retailers such as Burlington Stores Inc BURL.N, TJX Companies Inc TJX.N and Ross Stores Inc ROST.O could be a victim of increasingly sophisticated buyers to find deals at a time when every company has announced plans for expansion, he said.

“They’ve been the place to hide through thick and thin for a decade. But now all three are growing aggressively or trying to do so, which makes life more difficult when you have three big guys trying to grow significantly, ”he said. “They are more like department stores and department stores are more like them. “

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Reporting by David Randall; Editing by Jennifer Ablan


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