Member Q&A: $YETI and $COCO in the K Economy

We love hearing from members.

Some of our best stock features have been born from insightful member questions.

We received 2 over the last week from Vijay that we thought were right on and warranted some discussion — check it out:

Q:

Quick question I really enjoyed your last session on the K economy and abt the luxury brand names vs. non-luxury names. Im going to buy LULU this wk based on your suggestion, but what are your thoughts on also adding YETI as a choice to that list??

I’m also a BIG charts/fundamentals guy in fact I have a chat group w my family and friends called ECTAS Every Chart Tells A Story Trading and the charts for LULU and YETI look almost the same and I’m seeing accumulation starting for YETI just like its for LULU. So, thoughts on YETI sir??"

A:

This is a smart question.

On our end, Yeti (YETI) has steady consumer momentum and its trend is positive as consumers consider its product lineup as gifts.

Web visits continue to climb from the spring lows and the stock is quietly up ~12% YTD.

The important context is what we learned from earnings last week: The street is checking valuations.

Moves are strongest in names where the market priced in the wrong outcome. That is how KSS and ANF produced massive upside reactions.

It is also why DKS and NVDA produced positive but controlled reactions. Their momentum already matched their valuations.

YETI sits closer to that second group.

Healthy consumer activity. A stock that remains above the levels where it began the year. A constructive setup, but not the type of dislocation that produces explosive near term moves like the one we saw in Abercrombie.

Long-term, it can certainly keep grinding higher, and consumer strength supports that, but the more dramatic upside sits with names that are deeply mispriced. That is where we see faster payoffs in this environment.

Q:

"Hey, I might of found another one that might be considered for a K economy type stock: COCO

Why I like it?? The charts look amazing on it and seems institutions are piling into this guy despite how horrid the economy is right now, and despite the stock mkt going down a lot last couple of wks this guy seems to keep on powering upwards Would love your thoughts on it, when you guys get a chance, thank you so much just LOVE ur service!!!"

A:

The Vita Coco Company (COCO) has been impressive with consistent demand for its coconut water lineup and growing traction for its protein-focused hydration products.

Consumer demand has held up all year and the stock remains one of the cleanest climbers on our retail list.

It is up ~45% YTD and continues to move higher even as broader markets show stress. Your read on accumulation has been correct.

However, the same valuation principle applies here.

The long-term bullish thesis looks in tact, but the magnitude is different from names that have been oversold.

The faster upside sits with the high end consumer names that sold off hard and now print rising demand. BIRK is the clearest example we are watching in the near-term:

The stock is down ~23% YTD while consumer momentum picks up at a blistering pace.

ONON and URBN followed similar paths.

COCO is a solid name with a constructive setup, but our data isn’t screaming: edge.