Aravind Suri

Why I think Media General is a buy

2007-08-05T19:22:00.000-07:00

Shares of Media General (MEG) have declined by about 28% year-to-date. At the current price of $27.2 the stock is trading at almost a 10 year low. The publishing and media business has suffered dramatic declines in advertising revenue as a result of the internet. Classified advertising has increasingly migrated to the online space causing several companies in this industry to lose their bread-and-butter earnings.

While everything looks like gloom and doom, Media General has created a dominant franchise controlling dailies, television, and online properties in the S.Eastern United States, with Tampa being one of their strongholds.

In addition, in the Florida region the company has some dominant Spanish dailies that generate significant advertisement dollars.

Historically, odd numbered years have been trough years in terms of earnings for the company due to the absence of political advertising and the Olympics. While even years have contributed toward peak earnings. As such, 2007 is shaping up to be one of the worst years for the company. However, with the US Presidential Elections and the Beijing Olympics in 2008, the company should generate significant advertisement dollars.

In 2006 the company divested its CBS stations and acquired 4 NBC stations. This acquisition positions them very well for the 2008 Presidential elections and the Beijing Olympics. These stations are located in key battleground states such as Ohio, N.Carolina, and Virginia where signficant advertisement dollars will be spent. With NBC owning the broadcasting rights for the Olympics additional advertisement dollars will be garnered from these stations.

While the company has taken on a huge debt burden of approximately $900 million about 5X EBITDA, I believe that they will reduce their capex in 2008, potentially divest their interest in SP Newsprint, and generate about $100 mln in free cash flow in 2008.

Over the next two years they should be able to reduce their debt burden by at least $150 to $200 million providing for a proportional expansion in equity.

At the current depressed valuation levels, Media General has considerable upside of about 50% to 80%. With book value of about $32, there is considerable margin-of-safety in the investment.

Catalyst: 2008 Presidential Elections, Beijing Olympics

Why I consider Optimal Group a bargain

2007-03-28T20:49:00.000-07:00

Shares of online payment processing company Optimal Group (OPMR) crashed as a result of the US Internet Gambling Enforcement Act of 2006. The payment processing service for the online gaming unit provided approximately 50% of the company's revenue. According to the annual filing about 80% of this segment came from US sources, i.e. 40% of total revenues will be affected by this law.

Upon passage of this act Optimal Group divested this business segment into FireOne Group plc. an Ireland-based provider of payment processing services for the online gaming industry. Optimal owns 76% of FireOne Group.

Even if the outlook for this business segment does not improve, I still think Optimal Group is a bargain. The company's non-gaming unit, Optimal Payments, accounts for 60% of the revenue. While it has lower margins than the gaming unit, Optimal Payments is still profitable on a GAAP basis and generates considerable cash flow.

The balance sheet is solid. The company has cash and investments net of bank debt and customer obligations of almost $182 million ( approximately $8 per share), working capital excluding reserves of $94 million, and shareholder equity of $219.3 million (all as of Dec 31, 2006).

"Clinton Group" a major shareholder and hedgefund controls has about 4.9% of the shares. They have urged management to distribute the cash to shareholders as a special dividend or a dutch tender offer. In addition, they would like management to put itself on the block for sale. Clinton Group has reduced its holding from about 6.3% to the current 4.9%. Either way, the siginificant cash position will act as a floor on this company's share price.

Optimal Group has engaged Genuity Capital to investigate strategic alternatives. Recently, Optimal bought back about 1.1 million shares, something that the Clinton Group had suggested to Optimal's management. Optimal has also recently announced an offer for all of the outstanding shares of FireOne Group plc.

At this point the company looks like a bargain.

Quest Diagnostics

2007-02-08T22:09:00.000-08:00

Quest Diagnostics is one of the leading diagnostic and testing companies providing information services to doctors, hospitals, and managed care organizations.

Quest has approximately 150 laboratories and 2000 patient service centers. It processes over 140 million requisitions per year. At present, routine testing generates about 78% of revenues. The company is based in Teterboro, NJ and GlaxoSmithkline owns about 21% of the common stock.

Although, United Health has decided to use Lab Corp of America as its national provider, a position that Quest enjoyed previously, it is uncertain how negative this will be to the revenues of Quest. Although shares have fallen about 15% since Septenber 2006, I feel that the drop in shares, combined with the high ROIC provide an enticing entry point.

I haven't bought any shares of Quest but I am certainly considering the stock at this point.

I am continuing to research the stock at this point and will provide my new findings soon.

10 years later

2007-01-25T20:47:00.000-08:00

Somehow, I remember 1997 like yesterday. The cliché "time flies" truly is a cliché.

What is noteworthy and hopefully useful to people of all ages is that over those 10 years I have truly come to appreciate the power of compounding.

Take a look at the prices of the following comapnies in my portfolio on January 26th 1997:

Stock	1997	2007	% annual return
JNJ	$24.62	$66.68	17.08%
AIG	$27.62	$68.89	14.94%
NVS	$25.88	$58.26	12.56%
BRK.B	$1155	$3585.91	21.05%

It is interesting to note that, the stock that I least followed during that period was BRKB (Berkshire Hathway B) and it delivered the best return. My (Heartburn/Profit)% was pretty low with Mr. Buffett's company.

There is something to be said about patient and disciplined investing. You don't have to be a genius, what matters is the ability to maintain temperament, follow good companies, and pick them up when they are not in vogue.

Sounds easy right! However, I have found that to stick with that idea for 10 years is the hardest part.

Eat your beer bottle!

2007-01-25T19:55:00.000-08:00

Don't you just hate it when this happens? You finally discovered the most hated stock that the "lemming crowd" avoids. You buy into your research, but learn it the hard way that what you lack is temperament. (Oh! by the way as an affirmative you find that Mr. Buffett holds about 5% of the company.)

Investing boils down to one word "discipline". I will rephrase that, "life is really about discipline". Not to get too philosophical, over the years I have found that, common sense, patience, and probability (wherein an outcome is to a great extent on your side) are factors that really matter in investing. Most human beings are frail and susceptible to the vagaries of their own emotions and their environment. To some extent, the ups and downs in the market are mere reflections of our mood fluctuations.

First and foremost, (taking the liberty to use the opposite sex as an analogy to a stock) I think it's hilarious how Wall Street portrays the so-called "unattractive" woman. She was never ugly to begin with, so simply combing her hair and wearing a push-up bra turns her into a sex bomb!
When we compare this to a stock, it seems that thanks to several upgrade spells cast by the analysts, a stock magically rises from the dead like a gorgeous babe.

I bought into one such "shrek", Anheuser Busch (BUD). Back in late 2005, at $43 BUD seemed a bargain and when I sold it for $48 after 6 months, I thought a return of approximately 12% (without dividends) was excellent.

BUD generated double digit returns of approximately 13% in EPS growth over the last 10 years and has captured about 50% of the US market (a wide moat, or a competitive advantage business in my view). Interestingly, valuation has not kept pace with earnings growth. Today, the company trades around $51 about 12% below my estimated fair value my of about $60. . However, the certainty that the estimated fair value will be achieved without losing much sleep is what makes the stock more attractive to me rather than those upgrades.

The fact that I sold it for $48 and did not wait longer demonstrates my temperament in this regard. As someone said, I think it is "time to eat the proverbial beer bottle!"

Anyway, doing nothing or as one of my friends says colloquially "fuckin' the dog!", sometimes makes more sense.

Missed Opportunities of 2006

2006-12-22T22:20:00.000-08:00

Although 2006 was fantastic w.r.t my returns, my (Finance Obsession/ROI) ratio was not adequate. I suppose nothing is.
Anyway, as I analyzed my 2006 performance I realized that it was an year to pick low hanging fruit, i.e. a lot of good companies were bargains within plain sight. However, I seem to prefer making money the hard way. As I reviewed the spreadsheets, filters, and analysis that I meticulously maintained on a weekly basis, I rued several missed opportunities, such as:

1. Sysco (SYY) around $28 in August 2006. I had it on my radar, Trading around $36.65 today, this could have been a 22% return.
2. Walgreens (WAG) around $40 as recently as late November 2006. Somehow, I couldn't pull the trigger even though I realized that the whole Walmart entry into the retail drug industry was overblown. This was an example of a low risk 15% return in two months.
3. Tyco (TYC) around $26 was an incredible bargain at 13 times free cash flow back in June 2006. However, I decided to wait for a more opportune moment, which transpired to be a missed one. Anyway, this was another example of a low risk 15% return.
4. Microsoft (MSFT) around $22 back in June 2006. This was sick, I don't know how I managed to ignore a company with incredible cash flows and a host of new products such as the Windows Vista, XBox, and Zune. It is a cash cow and this is another no-brainer for a 31% return.

When I quantified these returns in absolute dollar terms, I realized that:

If I had bought 1000 shares of each of the above companies around their 52 week lows, which I had monitored very closely and bought them without chickening out, I could have made a return of 24% without including dividends. An absolute dollar amount of $27, 650. My frenetic trading in derivatives produced approximately $25,000, including some significant losses and heartburn. Although a return of close to 100%, I think the former approach would have helped me focus on other things in life while making money.

So, in my humble opinion patient investing that focuses on value will trump the interest to play dice.

Is Google "Darth Vader"?

2006-11-22T21:46:00.000-08:00

Google Inc. (GOOG) shares soared past $500 USD for the first time the day before...I pondered, how big can Google get before we realize that it is as villianous as Vader....

I admire Google, they turned search into a four letter word i.e. "a dime" without being a pain. Internet advertising is no more a bothersome popup, or a flashing image on a website, an unobtrusive experience for the surfing masses and free cashflow to Google. Vader figured out a way to monetize billions of searches without being intrusive while making us yell "I Googled it!".

Google collects an estimated 25% of all U.S. internet ad revenue and is encroaching traditional media such as newspaper and radio. With the acquisition of YouTube, and the whole advertising/media tilt, I feel the company will start to face its share of public relation challenges, despite it's "do no evil" mantra.

Growth potential is fantastic, however, such metrics seem to be priced into the companies current valuation. With a Price/Cashflow North of 86 and a Price/Sales of approximately 25, I think it is time for the "Revenge of the Sith". In this case, Mr. Market.

As the old maxim goes, anything that is too good to be true is, "Too good to be true!"

So, if you hear your favorite analyst on a TV channel such as CNBC, etc. touting "Vader" as a must have, I would say "caveat emptor".

IMHO, Google's business is progressing at a gallop, but it's stock price seems to be traveling at "Mach" speed. When stock prices outpace the business, you have to understand that the party cannot last for too long and that it is time to take some "moolah" off the table.

My "True Religion" is Capitalism

2006-11-07T19:39:00.000-08:00

Ya, that's right. It is not Judaism, Hinduism, or anything more exotic. It is old-fashioned, conservative, "true religion" i.e. "Capitalism" .

When my "true religion" does not live up to its expectations, I have no choice but to renounce and convert to agnosticism and not some other form of "Opium for the masses!".

Today "True Religion" the ecstasy (E) of the town, gave back $4.2 in after-hours (approximately 22% down). When the street expects 44 cents per share and the company can only muster an ice-cold, thawing 35 cents a share, you are not going to get converts, but a bunch of agnostics.

Stocks such as True Religion (TRLG) thrive on growth, their current price is a mere reflection of discounted future cash-flows. When such growth expectations fall short by a wide margin, nasty holes in the denim are the only things that remain in vogue. My friend, that in a nutshell is Wall Street.

True Religion a Los Angeles based company, founded by the husband and wife pair of Jeffrey and Ken Lubell was based on their love for music (rock, hip-hop & R&B) that translated to denim apparel; They pay attention to fashion-forward consumers and deliver innovative , hand-sanded washes, and trendsetting lines. I personally think their Jeans are amazing! However, some friends of mine say "So what, it's just a denim!" I say, your choice of denim can be a rubberstamp for life! I am exaggerating! However, I think, I make my point with some!

Not just investors, Heidi Klum, Usher, and the cast of the Desperate Housewives subscribe to that thought process. In addition to celebrities, some of the world's well known retailers such as Barney's of NY, Harrod's of UK, L'eclaireur of France, and B'2ND of Japan, etc. have decided to extend shelf space.

Although, I like their Jeans, cerebral me says that it is really hard for companies to sustain fashion statements over extended periods of time. The problem is that fashions blow hot and blow cold, and for companies to keep pace with the vagaries of a consumer is very difficult. As they say "One Robin doesn't make a spring".

I think True Religion shares have gotten somewhat ahead of the business and the street is starting to sober up. In my opinion this will be a repeat story with many of the specialty retailers in the New Year. As the US consumer comes to grip with more mundane issues such as monthly mortgage payments, credit card bills, and shopping at Costco, the importance of making a fashion statement with True Religion will become somewhat less significant.

It is high time that prudent investors start taking taking some money off the red-hot specialty retail sector table.

Guess which stock made u some mad money?

2006-11-04T17:29:00.000-08:00

I hope you guessed right! It is "Guess"!

GES for you home gamers. This stock is on a tear since 2003. Guess seems to be the "True Religion" of it's avid shareholders, rising from a measly $3 per share in 2003 to its current lofty $62 per share price. I thought specialty retailer's stocks (i.e. Guess GES, True Religion TRLG, etc.) were as washed-up as their jeans but I "Guess" I have been proven wrong.

At this point, valuations on Guess seem to be stretched farther than the rubber band on my Sunday New York Times. With a Price/Cash Flow of around 20, I think we are close to "yield point". I have to admit the annual growh in revenue, eps, operating margin for Guess are not shabby, 31% rev. growth, 120% eps. growth, 7.8% operating margin growth respectively. These growth numbers seem to have been adequately priced into the stock at this point.

On October 14th in my article (Stocks Climb Again), I had mentioned that Guess was starting to look overvalued at $56 per share, my opinion at $62 per share is not any different. When you see stocks generating 15% returns in a mere month, you know that the "guess" theory is in vogue rather than plain old common sense. Wall Street is following Pascal's statement "The heart has it's reason, that reason knows not of".

I do like Guess' growth/strategy, higher-margin sales in Europe, market penetration in Germany, Asia, etc. However, I am starting to wonder if the abnormal returns in the stock price can also be attributed to a huge growth in the short-position of the stock over the last year. Are we starting to look at the "Pigeon Hole" principle in action here? Pigeons can only be happy as long as there are enough pigeon holes. I might add, it gets a bit crowded otherwise.

An old adage I would consider worthy of the current environment is "Anything too fashionable must be close to obsolescence!"

Disclosure: I don't have any position in Guess (GES) nor True Religion (TRLG). However, I am considering buying some puts on Guess (GES) if it goes any higher.

Rip Van Winkle days

2006-10-31T19:32:00.000-08:00

It has been a long time since I've bought a stock. With the Dow making new highs and the S&P 500 going 76 days without a 1% intra-day decline, the longest streak since 1995, (such wisdom worth sharing at cocktail hour!) I guess as a value investor I could go back to sleep. Reminds me of Rip Van Winkle, albeit it hasn't been twenty years. Ridiculous, what is going on?

The last time I was awake, I noted that the REIT, Retail , and the Financial sectors were going gang busters; I was somewhat concerned that my pre-disposition to slumber and torpor would make me miss out on some wonderful opportunities. I mean, like the ones that presented themselves in the years 1929, 1987, 2000, 2003, etc. As a cigar-butt investor I can only dream about such occasions. However, when I did wake up, I realized that "Fantasia" was still the raging box office hit on Wall Street. Mr. Dow Jones confirmed, "another forty winks will do me no harm", and left me in my surreal world.

I know, I am being facetious, however, it is true, I haven't bought a stock recently. At this point, I certainly consider the market overbought and purchasing some put options within the retail sector and more recently some within the oil sector appeal to my conscience.

So, when I did manage to keep my eyes open and familiarize myself with the contemporary, I discovered that JC Penney was not only the hottest place to shop in, but the hottest stock to own? Stodgy, never-in-vogue, blah, etc, etc... JC Penney? Boy, that is weird! Yes, my dear, this is a stock that could have fattened your wallet by 400% since 2003..... hmmmm....someting's amiss..

Anyway, back to my non-Dali, terra-firma world, whilst flipping through my Sunday circulars, I also discovered that JC Penney's new clothing line is called, "a.n.a" i,e "A New Approach". Further investigation revealed that it is a corporate accronym for "anorexia nervosa" i.e. eating to the point of extreme weight loss (I am just kidding). I thought this promotion really meant, fattened JC Penney investors need "trimmer" waist lines.

Bottom-line, investors from Mumbai to New York feel that 15% annual returns are their god-given right and I think reality will set in sooner than later. As they say "Gravity Sucks". I guess gravity will play it's part soon and I will have to relinquish my days of slumber and keep my eyes open for those wonderful opportunities where a dollar sells for 50 cents.

Disclosure: I am short American Eagle Outfitters (AEOS), Abercrombie & Fitch (ANF), Dicks Sporting Goods (DKS), Kohls Corp. (KSS), Mastercard (MA), Exxon Mobile (XOM).
I have no position on JC Penney (JCP), however, it is high on my list of shorts.

2006-10-22T12:19:00.000-07:00

Technorati Profile

Do you Yahoo?

2006-10-17T20:54:00.000-07:00

Yahoo's stock continues to slide as it faces questions about its growth strategy. The GooTube (Google + YouTube) combination did not help me Yahoo!

Google's execution is perfect, I think they will leverage the video content and brand equity of YouTube as part of their growth strategy. Despite Mark Cuban's perspective that the legal eagles will be circling the company for purveying pirated video content, I believe that Google will figure out a way to stave off these potential problems. Google realizes that online video + advertising is a powerful concoction. It is not just about showing pirated shows of John Stewart or your favorite episodes of CSI. It is also about promoting the advertisements of a small-business owner who bakes cookies, partnering with Zagat to show videos of restaurants in different cities, or reality advertising ala "American Idol" style to review and rate different ads. I think Google has several options.

What puzzles me is why Yahoo didn't make the move? Did Mark Cuban freak them out with his legal take on YouTube? After all, Yahoo bought broadcast.com from Mark.

So, should Yahoo do a "YahooBook" i.e. a Yahoo + Facebook merger? IMHO, I think Yahoo should not jump into a merger merely to please Wall Street.

As Terry Semel, Chief Executive of Yahoo mentioned in the conference call, Yahoo needs to "get back to basics". Yahoo's growth impinges on its ability to enhance content, ensure that "Panama" its advertising strategy remains on track. Despite Yahoo's travails, investors should realize that Yahoo is the granddaddy of the .com era. Although, Google is the leader in on-line advertising with a 25% market share, Yahoo commands about an 18% market share and sales have risen by 20% in the 3rd quarter of 2006 compared to the same period in 2005. With a projected revenue of between $4.48 and $4.60 billion for 2006, Yahoo's growth strategy depends on a "laser-focused" attitude towards ad-revenue generation capability.

I like their acquisition of AdInterax, a provider of online advertising services and shareholders will be pleased to hear the authorization to repurchase $3 billion of common stock over the next five years.

Yahoo's P/E of 18 is less than that of these overpriced retailers such as American Eagle Outfitters (AEOS) and UnderArmour (UARM). Who would have thought .com companies would be cheap on a P/E basis back in 1999? (Didn't they come up with the Price-to-Click metric or something like that.....simply ridiculous....) I guess the old adage...what goes around comes around....stays.

So, is it time to Yahoo?

I would wait for the dust to settle and consider the following:

A vertical bull spread for January 2009. Sell the January 2009 $30 call (@ $3.2 per option) and buy the January 2009 $25 call (@ $4.9 per option). This would have a net cost of $1.7 (no commissions included)

If Yahoo stock is $30 at expiration in January 2009, the net profit in this strategy would be $3.3 ( $30 - $25 - $1.7) i.e. a 194% return in 2 years. So, if you invest $10,000 in this strategy it would give you a profit of $19,400. :-)

If Yahoo stock finishes below $25 at expiration in January 2009 then the maximum loss is $1.7

Disclosure: At this point I don't own any Yahoo calls but I have Yahoo on my watch list.

Hasta la vista American Eagle

2006-10-17T19:23:00.000-07:00

At the beginning of the year I believed that American Eagle (AEOS) shares provided a significant margin of safety when they were trading in the $21 to $24 range with a P/E of around 12. With a fantastic ROIC and further confirmation of my evaluation by Greenblatt's "Magic Formula Investing" screener, I was convinced that AEOS was a "booyah" (as Mr. Cramer might suggest)

At $45 and change now, AEOS stock is hotter than their risque advertisements. I am not sure that the Martin + OSA concept will fly.

Insiders certainly seem to be warming up for Christmas by selling the stock at a rich 21 times earnings. At these valuations, this stock has little room for error. A decrease in same-store sales, decrease in inventory turns, etc. can give this stock a nice shave that some of their stubbled models might deserve.

I think it is time to take some money off the table w.r.t AEOS.

Happy Shorting!

Disclosure: I own puts on American Eagle

Don't get nutmegged by Wall Street!

2006-10-15T18:30:00.000-07:00

I find it amazing that a panoply of free financial tools exist on the web and yet we investors seem to get "nutmegged" (pejorative term for fooled) by Wall Street time and time again.

So I tried MSN Money Investment toolbox (a free internet stock screener) to apply some financial criteria to discover companies that might be bargains.

Expedia (EXPE), LandAmerica Financial Group (LFG), USEC Inc. (USU), and Hanes Brands (HBI) all passed a simple test of value.

Price / Book Value "<" 1
Price / CashFlow "<" 15
Market Capitalization > $300 Million (Not a microcap )

EPS Growth Qtr. vs Qtr > 15% (Healthy earnings growth)

Debt / Equity "<" 0.4 (Low debt level)

These companies are trading below book-value, and their quarter-over-quarter earnings have increased by 15%. In addition the Price-to-cashflow ratios of these companies are below 15, i.e. an average cashflow yield of approximately 10%.

What I particularly like about Hanes Brands (HBI) is that it was recently spun-off from Sara Lee. Joel Greenblatt (Gotham Capital) in his book "How you can be a stock market genius" (a cheesy title for a wonderful book) suggests that spin-offs generally tend to outperform the market in their second year as independent comapnies. Minimal coverage of Hanes Brands by Wall Street analysts and a healthy balance sheet are additional factors that I find appealing.

I will cover these stocks with greater detail in my future posts.

Disclosure: I don't have any positions in the stocks mentioned in this posting.

Stocks Climb Again - It is Umpa-Lumpa time

2006-10-14T12:36:00.000-07:00

The Dow Jones Industrial Average (DJIA) made an all time high on Friday (Oct 13) reaching 11,960.51. The bulls seem to be in total control for now. Several theories are floating around as to why the market is trading at new highs despite the slowing economy.

Increased liqudity in the market (an increase in M3 Money Supply i.e. institutional money funds, large time deposits)
Lower gas prices (crude oil falling from $78 a barrel in August to the current $59 level)
High short-interest on the NYSE (short squeeze)
Rally in large-cap stocks (several large caps are undervalued)

Increased consumer spending
The Federal Reserve will start to lower short-term interest rates

So, what happened to the Iraq war, the North Korean nuclear test, the Iran nuclear stand-off, the huge US current-account deficit, upward trending US interest rates, and last but not least the correction in the US real estate valuations?

Investors seem to be marching fife and drum, with nary a glance at the geopolitical and fiscal environment. Since August 2006 the DJIA has increased by 10.75%. (incredible)

I find it hard to believe that a reduction of $1 per gallon at the pump (although significant) over less than a couple of months has suddenly made the US consumer feel warm and fuzzy. The strength in the retail sector is really puzzling. Several of the specialty retailers are showing double-digit growth in same store sales and continue to make new 52-week highs. Look at the charts of the following companies:

American Eagle Outfitters (AEOS)
Abercrombie & Fitch (ANF)
Dicks Sporting Goods (DKS)
Nordstrom (JWN)
Guess (GES)

In my opinion these stocks are starting to look overvalued. American Eagle Outfitters (AEOS) was a great stock to own at the beginning of the year ($21) but with about a 120% gain in the stock price, I think the party might just be getting over and the stock is probably due for a pullback.

Some stocks such as

Under Armor (UARM)
Coldwater Creek (CWTR)
Zumiez (ZUMZ)

are just behaving like the .com stocks of 1999. Is this price appreciation driven by strong and sustainable fundamentals or, is it merely an year-end window dressing charade of the mutual fund managers? Whatever it be, I guess Wall Street will always have a reason.

So where do we go from here? The benchmark indices may continue to set new highs (although the Nasdaq might have to wait a few more years) running up to the mid-term elections in November. However, the market is certainly setting itself up for a scary time this Halloween season and the "Umpa Lumpa" might just show up to take away the spoilt investor.

On that note, I would consider investing in the following:

Buy at-the-money put options for May 2007 on AEOS, ANF, UARM

My rationale for these recommendations are:

These stocks are overvalued and over-extended;
Consumer spending may not hold up into next year (reality will set in when investors come to grips with the sharp correction in property values)
Money is no longer cheap (Fed has increased interest rates 17 times since 2004)
I don't think we will see $40/barrel oil in the near future

Disclosure: I own puts on American Eagle, Abercrombie & Fitch, Dicks Sporting Goods