’21 Recap & ’22 Outlook: Bullish on Auto Suppliers & Select Retail, but Where is the Consumer?

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I had a pretty good 2021. $SPY was up about 28% this year and I am up about 33% in my PA. My PA is a bit different than what I write up on here though. My main benchmark I use too is the Russell 3000 to capture an apples-to-apples comp of what I write about. I don’t compare annual results on the blog, but instead look at performance of my picks compared to just putting that money in the R3K (all on an equal-weight basis) until I say it is time to close out.

As you can see below, I am still outperforming by about 20 percentage points based on all of my picks. Unfortunately, the picks from this year haven’t performed. I am a long-term investor though, so I wouldn’t expect these names to play out in 12 months anyway.

Find further notes below the chart.

Here are some quick thoughts as I recap ’21 and look out to ’22:

  • Thank you for reading. The blog had 40% more views this year than last and about 4x the views of 2 years ago. I hope to continue to drive engagement!
  • Laughable to compare what I first wrote about to today.
    • I have a saying that “when you hear a friends value-stock pitch, give it 6 months to “season”. Your friend thinks “it can’t get any cheaper!” and it invariably does.”
    • I think that’s what I was doing when I first started the blog. I had such a feeling Nexeo was cheap, I had to write about it. It eventually got acquired by a strategic, but wasn’t that compelling at the EoD.
  • Some of my worst performing ideas of ’21 I am still incredibly bullish about.  
    • I just did an update on $ABM, $LGIH is a long-term compounder that requires patience, and I have become even more bullish about my auto supplier thesis. I get more into auto suppliers below.
    • Several names I picked from last year are not doing well comparatively, but I continue to like including $BIG and $NCMI – everything at the theater chains has proven they are not dead. Ad dollars will follow.
    • A lot of my performance has been driven by good picks in 2020. Let your winners run, as they say. I still see value.
  • Theme of 2021: a lot of auto and retail… is it a red flag as that is what I am bullish about in 2022??

        • But here’s where macro meets micro: I don’t understand why consumer sentiment is SO BAD.  I hear the inflation argument – that sours consumer moods. But it seems hard for cyclicals to work too long without the consumer.
        • Why is consumer sentiment at 1990s recession levels? Or below 2001??

      • Like I said, I am staying long and strong retail and auto next year, I see fundamental momentum and I personally think a lot of names have changed their business models for the better, but I see the negative tea leaves forming as well.
  • My 2022 call is auto suppliers are going to crush it
    • I plan on doing another post on this, following my first on American Axle and the other on Strattec. Auto suppliers definitely are a segment full of “value traps.
    • In my next post, I’ll talk about low inventories in the channel and how much (and how long) it will take to restock.
    • Here is the bottom line: when do you have recession levels of production, but demand has already improved drastically. Even if demand slows, production has to be elevated to restock the channel.
    • Investors are always worried about demand and production levels in autos given fixed costs, but the visibility of go-forward production levels is obvious: UP! 

Another positive thing I saw was from twitter. Sorry a couple other macro things:

Lastly, Consumer balance sheets do appear in good health and well below trend low. More capacity to lever up!

That’s all for now! Stay tuned for that next post.

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