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

#1 BLACK FRIDAY: Retail data from Sensormatic Solutions indicated that store traffic on Black Friday declined 28% compared to 2019. This was likely driven by shoppers starting their holiday shopping much earlier due to supply chain concerns. 61% of shoppers surveyed by the NRF said they had started their holiday shopping before Thanksgiving compared to 59% last year.

#2 PROFIT MARGINS: A recent study published by Strategas suggests that estimated profit margins for the S&P 500 are expected to stabilize around 17% compared to just north of 15% before the pandemic. However, an extended period of higher input cost could threaten record profit margins in specific industries that lack pricing power.    

#3 CONSUMER SPENDING: Wedbush recently surveyed 500 mid-upper income consumers regarding their intention to purchase big-ticket durable goods over the next 18 months and found that 42% of the respondents expect to increase such spending. Only 21% were anticipating fewer expenditures on big-ticket items.

#4 STEEL PRODUCTION: Global steel production is up 6% year to date but fell year-over-year by 10.6% in October to 145 million metric tons. According to Bradesco BBI, the decline in October resulted from production curbs in China due to power shortages. In addition, steel production in countries like Turkey has been disrupted by input cost inflation in energy and scrap metal prices.

#5 U.S. LODGING: Last week, U.S. hotel RevPAR (Revenue Per Available Room) was up 108% from a year ago, according to a report published by Deutsche Bank Research. Rates were up 43.0% from the same period a year ago, and occupancy was up 45.2%.

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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.

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