The Container Store (Short Stack Portfolio Edition)

Short Stack Shove

How did I end up here?  How did I land on this stock for my sexy high-risk, high-reward Short Stack portfolio?  A big box retailer that sells fancy shoe boxes?  Come on!

You remember the short stack.  I talked about it in an article a few weeks ago.  I’ve carved out a very very small portion of our savings to make all-in bets on one or two companies with a goal of 50 percent returns in 6-12 months.  Here’s how it stacks up so far:

Short Stack 2

There it is.  TCS.  The Container Store.  I promised to write about the companies I chose to invest in.  This is my way of doing research.  It forces me to lay out my argument and really think about why I want to risk the short stack on a particular company.  So, why The Container Store?  What is it about this stock that is even remotely appealing?

Straight-forward and on-trend

Remember what I said in The Short Stack?  I don’t like to get fancy with my stock investments.  I like to be able to easily define what the companies do.  The Container Store has it spelled out in their name, which is a tremendous help for a lazy bum like me.  This is a store that sells containers to put stuff in.  In fact, they are the only big box retailer the fully fills this niche.  It doesn’t get much more complicated than that.  I like that. What’s more important, is that they seem to be in the right niche for the times, for a couple of reasons.

First, we’re buried in stuff and it’s stressing us out.  Our lives are getting more complicated.  Even though our connected devices promise a boost in productivity, in many ways, all they’ve done is made us much more distracted and our lives much more chaotic.

You can see this stress play out on the extreme end in the rising popularity of shows about tiny homes and books by Marie Kondo.  The vast majority of Americans won’t downsize to the extreme minimalist lifestyle boasted by these examples.  That would be bad for The Container Store.   The shock-and-awe of these campaigns will rub off a little, though.  They spur action for the rest of us to at least get ourselves organized.  That’s good for The Container Store.

Second, more and more people are working from home, starting side-hustles, or just fooling around writing random content like I’m doing right now.  For that, you need a home office and a way to organize your side-hustle stuff, at least if you want your hustle to be sustainable.  The Container Store is helpful for that too.  Check out this get-up that goes right next to your fridge… Hell yeah!

elfaKitchenOffice

This is just a small taste of why I believe The Container Store is on-trend, but I’ll stop before this turns into a full-on advertisement.  My point is, if you’re living any kind of modern, always-on, multi-task kind of American life and you don’t want it to completely run you over, more and more you need to get stuff organized.  The Container Store seems to be the only one-stop-multi-channel-shop for that.  It’s why I like the concept and one reason I like the stock.

Like a little bird kicked out of the nest

Some stocks go public to a lot of hype.  Then they fall like a rock if they don’t live up to Wall Street’s unrealistic expectations right away.  If they’re lucky, they flap their wings before they hit the ground and go splat.  I believe this is where we’re at with The Container Store.  The stock is just now starting to level off and I am betting it will take off.

High expectations have turned into incredibly low expectations.  The quarterly numbers announced earlier in August for The Container Store weren’t great and the conference call was uninspiring at best.  The company missed Wall Street expectations on revenue, same store sales were down and yet the stock barely blinked.  It stayed relatively flat since earnings were announced.

Technical traders may even notice the 50-day moving average still creeping up toward the 200-day moving average.  I’m not a technical trader, myself, but I believe it’s bullish if the 50-day moving average crosses above the 200-day.  It seems bad news is baked in and sellers are running out of steam.

Meanwhile, new initiatives like TCS Closets and Contained Home, services that help organize your home and design your closets, haven’t yet had a chance to fully take hold.  Even though same-store sales were down in a rocky macro-environment for retail, TCS Closets made a significant impact to help prop them up.  There is also plenty of room for The Container store to grow its store footprint.  There are only 80 stores across the country and the company has made a commitment to grow responsibly by testing smaller sized stores in smaller markets with a strong focus on services.

Look, it wasn’t that long ago that The Container Store was the toast of Wall Street, priced at more than $40 per share right after it went public.  I think it’s too soon for the market to have forgotten why it liked the stock in the first place and I think the market still wants to see this stock succeed.  Just a little bit of good news could cause this stock to pop pretty quickly and that’s exactly what I’m looking for in the Short Stack portfolio.

I am not an investment advisor.  These are my opinions.  I own shares of TCS.  I am a long-term investor in ETSY along with other individual stocks not mentioned in this article in another portfolio.  Please do your own research before investing in any individual stock.  

follow me on Twitter @cabbageblog

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