Hodges Fast Five

Friday Fast Five - 1/27/2023

Written by Hodges Investment Team | Jan 27, 2023 1:00:00 PM

Five interesting things that Hodges Capital research analysts discovered this week...

#1 TRADE-DOWN TO PRIVATE LABEL: According to the Private Label Manufacturers Association, from January 2022 to October 2022, private-label sales across all stores rose +10.4% from the same period the year prior, compared to a +5.8% rise for national brands. A recent survey by the Food Marketing Institute of food retailers found that 80% of them plan to increase their investment in private-label brands.  

#2 STRUCTURAL BENEFIT FOR THE WALLBOARD: Data from the Gypsum Association suggests that industry shipments increased 6% year-over-year in the December quarter. Although the backlog of new homes to be completed is expected to slow because of higher interest rates, higher utilization across the industry resulting from the structural limitations on synthetic and natural gypsum supply could result in relatively resilient wallboard profits in the near and long term.

#3 BLOCKBUSTER: ‘Avatar: The Way of Water’ is the third James Cameron movie to gross over $2 billion at the global box office, according to CNBC. Only five other films have hit this metric – the original “Avatar,” “Avengers: Endgame,” Cameron’s “Titanic,” “Star Wars: The Force Awakens” and “Avengers: Infinity War.” Reaching the $2 billion mark is a good sign for the Avatar franchise, with three more installments slated for release over the next five years.

#4 IS ORGANIZED RETAIL CRIME A REAL THING? A 2022 survey conducted by the National Retail Federation found laundry detergent to be among the most stolen items in organized retail crime, contributing to a $94.5 billion inventory shrinkage issue for the retail industry. These crimes are not as simple as a lone shoplifter pocketing a product. Instead, criminal organizations are stealing large quantities of goods and reselling them for profit, according to Business Insider.

#5 HIGHER RATES FOR LONGER: “Loan and deposit rates have not been this high since the late ‘70s and the early ‘80s. That is when Paul Volcker took rates to the low 20s and finally killed the snake, better known as inflation. This is the second fastest that we have ever raised rates in the history of our country. Our belief is that we have higher rates for longer. We’ve not even hit the 50-year average Fed Funds, and the pivot crowd will be disappointed because Powell is aware of the early pivot that Volker did in the ‘70s. Inflation was not over then, and it’s not over now.” John Allison, Co-Found, Chairman, and CEO of Home Bancshares.


 

Hodges Private Client is a program offered through Hodges Capital Management, Inc. (“HCM”). HCM is an Investment Advisory Firm registered with the Securities and Exchange Commission (“SEC”), is a wholly owned subsidiary of Hodges Capital Holdings and serves as investment advisor to the Hodges Funds. HCM is affiliated with First Dallas Securities, Inc, a broker-dealer, and investment advisor registered with the SEC.

This discussion is not intended to be a forecast of future events and should not be considered a recommendation to buy or sell any security. Past performance is not indicative of future results. Investing involves risk. Principal loss is possible. Investing in smaller companies involves additional risks such as limited liquidity and greater volatility. No current or prospective client should assume that information referenced in this communication is a recommendation to buy or sell any security or is a substitute for personalized investment advice from your individual advisor. HCM does not provide tax or legal advice. Consult your tax or legal advisor for any related questions.

All information referenced herein is from sources believed to be reliable and is provided as general market commentary and does not constitute investment advice. This material was created for informational purposes only and the opinions expressed are solely those of HCM. HCM shall not in any way be liable for claims and makes no expressed or implied representations or warranties as to the accuracy or completeness of the data and other information. The data and information are provided as of the date referenced and are subject to change without notice.