My personal Star Search

| December 01, 2023

I don’t spend much time anymore at malls or brick-and-mortar retail outlets. You probably don’t, either. We’re doing more shopping online and don’t care to brave the demolition derby experience of large parking lots.

There’s are two exceptions, however. One, during the holiday season, I might go window shopping, maybe drop into a store to look at something specific. I’ll probably order anything of interest online anyway, because I’m also finding it increasingly difficult to find exactly what I want at stores.

The other is when I see a new retailer or restaurant. I’m always looking for investment ideas, and when I see a new business move into town, I get curious. It reminds me of when I was growing up, watching Ed McMahon introduce unknown talent on Star Search (trust me, it was better than America’s Got Talent).

I’ve found it difficult to invest in retail companies because it’s so difficult to maintain a sustainable advantage in retail. If a clothing chain becomes trendy, what’s to stop a competitor from vying for that market share? And what happens when it’s no longer trendy?

I remember when Chico’s FAS was popular. The women’s clothing retailer could do no wrong, and its stock price kept going up and up. Then, suddenly, it couldn’t do anything right. The same thing happened with Coach. It was enormously successful until its chief designer left.

As a result, I like to hunt for the next retail stars before they were famous. Many of these companies haven’t gone public yet, but I’ll keep an eye on them in case they do. It doesn’t have to be a flashy new kid on the block. Sometimes there are small companies that plug away slowly.

Winmark is my favorite example. It franchises businesses that buy and sell used sporting goods, musical instruments, and other items. Play It Again Sports and Music Go Round are two of their brand names—you’ve probably seen them at strip malls but didn’t really pay attention to them. Well, they’ve been hiding in plain sight. I don’t know whether it’s a good investment today, but the stock price has grown from about $55 to over $430 over the past 10 years.

If you’re looking for other small companies, there are a couple of resources I like to look through. One is Forbes’ annual America’s Most Successful Small-Cap Companies. I’ll bet you haven’t heard of half these companies, but it’s always an interesting list to comb through for ideas.

This year’s list, for example, includes a Bradenton-based company called First Watch Restaurant Group. Its restaurants serve breakfast, brunch, and lunch around the country. I haven’t been to a First Watch yet, but I’ll be on the lookout for one.

This is the fun part of investing. Finding an idea, researching the company, looking at its fundamentals and seeing whether it fits my investing goals. And the best part is if you can invest in the stock before its price takes off into space.

Evan R. Guido is the Founder of Aksala Wealth Advisors LLC, a 2018 Forbes Next-Gen Advisors List Member, and Financial Professional at Avantax Investment ServicesSM. Evan heads a team of retirement transition strategists for clients who consider themselves the “Millionaire Next Door.” He can be reached at 941-500-5122 or   Read more of his insights at Securities offered through Avantax Investment ServicesSM, Member FINRA, SIPC.  Investment advisory services offered through Avantax Advisory ServicesSM, Insurance services offered through  an Avantax affiliated insurance agency.  6260 Lake Osprey Dr. Lakewood Ranch, FL 34240.  The views and opinions presented in this article are those of Evan R. Guido and not of Avantax Wealth Management® or its subsidiaries.  Past performance does not guarantee future results. The S&P 500 is an index of 500 major, large-cap U.S. corporations. Standard & Poor's is a corporation that rates stocks and corporate and municipal bonds according to risk profiles. The S&P 500 is an index of 500 major, large-cap U.S. corporations. You cannot invest directly in an index.  An investment in a money market fund is not insured or guaranteed by the FDIC or any other government agency.  Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.  CDs are FDIC insured and offer a fixed rate of return.  They do not necessarily protect against a rising cost of living.  The FDIC insurance on CDs applies in case of insolvency of the bank, but does not protect market value.  Other investments are not insured and their principal and yield may fluctuate with market conditions. Investments are subject to market risks including the potential loss of principal invested.