Now's the Time to Own Office Depot, Not Kors

Wednesday, November 5, 2014 Now's the Time to Own Office Depot, Not Kors   by Jamie Dlugosch   We are moving into a new stage of the economic recovery from the ashes of the financial crisis.   It's been a long road to hoe, but finally the little guy is about to have his moment in the sun.   For the first several years from the abyss of the housing collapse, the government and the Federal Reserve purposely conspired to rig the financial system heavily in favor of the haves versus the have-nots.   We'll leave the social ramifications of this to others.   From an investment standpoint, that collaboration in policy absolutely prevented an even worse crisis or depression from occurring.     FURTHER READING   [WATCH] Senator Paul Warns of Roman Empire-Like Collapse     In a must-see speech, Senator Rand Paul revealed shocking proof of the Federal Reserve's secret bankruptcy.    But the most frightening part of this video is what this could all lead to - a $100 trillion American meltdown.    Click here to see the evidence...     Still, the disadvantages for the little guy have been stark and probably one of the main reasons the economy has yet to really take off.   That's about to change. With that change will come a performance advantage for stocks that cater to the small guy versus stocks that cater to the haves.   We are starting to see that in two retailers that reported earnings on Tuesday.   Luxury retailer Michael Kors (NYSE: KORS) missed expectations in its  report. Shares sank 8% in the first day of trading after the news was released.   The problem for Kors is sales growth. The haves can only take you so far. If there is not a robust market of have-nots that are improving their lot in life, sales are ultimately going to collapse.   Same-store sales for Kors rose 16% versus an expectation of 19%. It might be hard to argue that 16% sales growth is negative news, but when your stock trades for a rich valuation, any misstep can have a huge impact on share price.   I think the miss says more about the long-term potential for Kors.   Lower crude prices and a stronger job market will for certain help the have-nots, but I don't see those folks running out to buy Kors products with their hard-earned extra cash.   Nope, I would expect that spending to be seen elsewhere.   On the flip side of Kors, Office Depot (NYSE: ODP) shares are jumping more than 20% after it topped expectations and gave positive guidance for the future.   The struggling office retailer is in the midst of a turnaround that looks to be happening at exactly the right time in the cycle.   An indicator of future strength can be seen in the Paychex (NASDAQ: PAYX) small-business jobs index.   That index measures strength in the job market for companies with 50 employees or less.   On Tuesday, Paychex said that index came in at 100.84, growing  0.23% over the last 12 months. Any reading over 100 is a thought to be a sign of strength in the job market.   For Office Depot many of those small businesses showing job growth strength are prime candidates to help fuel sales growth there.   The improvement of the little guy might just be a green shoot at the moment, but far-sighted investors can play the trend by owning stocks like Office Depot instead of the luxury names like Kors.   Jamie Dlugosch Editor Investor Research Institute   To Read More From Investor Research Institute Click Here
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