There has been a resurgence in talks of a coming recession from various factors including an uptick in unemployment, the yield curve coming out of inversion, and continued elevated borrowing costs despite the initial Fed rate cut expected in September. We’ll discuss an under-the-radar consumer stock bucking these pressures. A quick look at the Consumer Discretionary Select Sector SPDR ETF (XLY) you’ll see the group has lagged the broader averages. But that’s not the whole story. Sector heavyweights Tesla, Nike, McDonalds, and Starbucks have been dragging the sector down due to company and industry-specific factors rather than a macro call on the collective consumer slowing. If you look below the large-cap level of various consumer discretionary companies you will see many companies which are innovating, growing market share and earnings, suggesting the consumer is not slowing and perhaps consumer tastes and trends are changing. Relative strength A perfect example is Sharkninja (SN) , a household durable name within consumer discretionary that came to market just last year and is making new highs. I recently added this name to our portfolio at Inside Edge Capital. To start, let’s examine the industry household durables that is contained within the consumer discretionary sector. Looking at the Relative Rotation Graphs of the consumer discretionary ETF and household durables since June 1st of this year you’ll see that both arrows are rotating up and to the right, which indicates increasing relative strength and relative momentum to the underlying benchmark S & P 500. Clearly household durables are leading consumer discretionary. This is confirmed on the right side of the chart with a simple percent change from June 1, with an increase of 18.92% vs the S & P 500 and consumer discretionary’s 5.39% and 5.88% return in the same period. If we add the Sharkninja arrow to the Relative Rotation Graphs you’ll see that RN is much further to the right indicating greater relative strength to consumer discretionary and household durables. Most importantly, the arrow just turned back up after a blow out earnings report that suggests the stock could be headed higher. Turning to the company itself they operate under two main segments ‘Shark’ and ‘Ninja’ and provides innovative consumer products including vacuums, cooking, air fryers, blenders, ice cream makers, food preparation appliances, coolers, and so much more. Breaking out The company has been growing revenues aggressively and expanding margins due to secure supply chains and a focus on high-margin products. To the chart you will see a major breakout in August after Q2 earnings of $0.71 that beat expectations of $0.60 (19% beat) and grew 51% vs the same quarter last year. Revenues grew 31% to $1.25 billion from the same quarter last year and beat consensus of $1.09 (14% beat). Following the earnings report the stock has been consolidating in a very tight range around $90.00 but just in the last 3 trading days the stock broke out above $92.50 resistance level. The breakout was on above-average volume of 1.3M shares over the past 50 trading sessions, which helps to secure the breakout. We added SN to our growth portfolio at Inside Edge Capital on August 24th, 2024 with a 1% allocation. Should we hold the breakout level, I will be looking to increase the allocation for a move into Bank of America’s recent upgraded price target of $102 and Goldman’s target of $110.00 -Todd Gordon, Founder of Inside Edge Capital, LLC DISCLOSURES: (Gordon owns SN personally and in his wealth management company Inside Edge Capital. Charts shown are MotiveWave) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
