The Mega-Mall Portfolio

By Ryan C. Fuhrmann | May 04, 2011 AAA

Investing legend Peter Lynch was fond of recommending that investors buy what they know, to make money on stocks. This included finding popular stores at the local mall and finding out if the company had a stock that traded on the stock market. His strategy worked out extremely well for investors in his Fidelity Magellan fund, and his philosophy of investing close to home still works to this day. Below is a current retail portfolio of major store chains that can be found across malls in America. (For additional reading, also see Biggest Shopping Trends For 2011.)
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Apple
Without fail, the Apple (Nasdaq:AAPL) store at the mall is packed with loyal patrons. Many consumers received their first taste of Apple's innovation and product design savvy with the iPod, and evolved along with the company to the iPhone, then iPad. Along the way, Apple has turned the music, mobile phone and computer industries upside down with extremely popular products that have either created a new consumer product (iPod, iPad), or stolen shares from a crowded an intensely competitive existing market (iPhone).

The wave of new products has also reinvigorated demand for Apple's Mac computers, which had been left for dead in a computing world dominated by the likes of Microsoft and Intel. The innovation has proven phenomenally lucrative for shareholders, as the stock has rallied from just over $7 in December 2002 to a current $350 in what counts as one of the most successful investments in the past decade.

Nordstrom
The latest economic recovery has seen high fashion recover faster than the rest of the retailing market in general. This could be because it was the most severely impacted during the credit crisis, and therefore had the most room to recover.

Nordstrom (NYSE:JWN) has a more upscale focus, compared to other department store rivals that include Sears, J.C. Penney and Macy's. This market positioning has served it well, and the stock has rallied in sympathy, rising from around $13 per share in December, 2008 to closer to $50 per share currently. And with only a couple of hundred stores throughout the country, there is plenty of room to continue to open new stores.

Tiffany
Shares of Tiffany (NYSE:TIF) bottomed out in November, 2008, falling to less than $20 per share, and have recovered to more than $67 per share to offer another stunning example of a rebound in the fortunes of an upscale retailer. Tiffany specializes in jewelry, and sells a wide array of highly expensive diamonds, rings and necklaces, as well as a mix of more affordable products, including its flagship silver and charms, bracelets and high-end gifts.

As with Nordstrom, consumers have returned to higher-end retailers in droves, and Tiffany has been no exception. It has also had more opportunity to rebound, given a global store base and major presences in Europe and Asia.

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VF Corp.
VF Corp.
(NYSE:VFC) is not a household name, but many of its brands are. The upscale recovery theme rings true with the company's North Face, Nautica, and 7 For All Mankind franchises. North Face has an increasing presence with its own stores being opened throughout malls while all brands can be found at department store chains throughout the U.S. and other countries.

The company also sells a number of more middle-of-the-road brands including Wrangler, Lee and JanSport, and has a proven history of growing and maintaining a diverse collection of brands. Acquisitions in recent years have been centered around higher-end brands, which have served it well during the recent economic recovery.

Urban Outfitters
Urban Outfitters'
(Nasdaq:URBN) roots stem from college towns where the company started and perfected a namesake store base that sold trendier, edgier apparel and home furnishings built for dorm rooms and apartments. It has since expanded into more suburban locations, and can increasingly be found in malls throughout the United States. More recently, Urban created the Anthropologie concept that specializes in a more eclectic mix of merchandise and apparel for women in their 30s and 40s. This and the namesake concept account for the majority of sales, and are surrounded by a smaller franchise called Free People, which has about 34 stores and sells its clothing to other mall-based department stores.

The Bottom Line
Many of the above themes, including the recovery of higher end retailers, have already played out, but the operators above still have solid prospects to open additional stores in malls and outdoor shopping centers across the nation. (For related reading, also take a look at Analyzing Retail Stocks.)

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