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E-motions: Vol. No. 1, Issue No. 21 Brought to you by California News Tech (OTC BB: CNTE)
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By: Tai Nicolopoulos
E-Motions Writer
02/08/2006
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MediaSentiment™ Fashion Forward on Q3 Coach, Inc. Stock Pick |
1. Emotions in Focus: Following Up Investment Trends
Many investment resources talk about making trades on consumer trends, but actually following the correct trends, and then forming the right conclusions about how to invest on them is more elusive.
It is necessary to understand a triumvirate of factors that all contribute to the outcome of a trend for a particular company.
First of all, it is necessary to find a current trend, to establish how prevalent it is, and how much money consumers have been willing to put behind it. This step involves following the media, gaining insight into popular culture, and spotting the top trends in a wide variety of consumer segments.
In the next phase, it is important to examine the trends you have previously identified in order to determine which have most staying power. In some cases, by the time the financial media becomes aware of a trend specific to a different demographic, such as the youth market, the craze may almost be over. It is critical to determine how long a trend has before it has saturated the market. For instance, Everett Roger’s Diffusion of Innovations Theory states that different groups participate in a trend throughout the various parts of its life cycle. These groups from beginning to end of the trend are Innovators, Early Adopters, Early Majority, Late Majority, and Laggards. Determining who has adopted a trend so far is one of many ways of determining how close it is to saturation. People who are social leaders, popular, and well-educated tend to make up Innovators and Early Adopters. Meanwhile, people who are deliberate and have many informal social contacts, tend to make up the late majority. Finally Laggards tend to be skeptical, traditional, and of lower socio-economic status. Whether usingEverett’s theory or another, it remains important to assess the future viability of a trend, including the size of its potential market and its market saturation, before investing in it.
In the last phase, before investing, it is time to ascertain which companies are most likely to benefit in the future from the trend in question. This analysis can include everything from looking at the brand names at the heart of the trend to stocks’ fundamentals. An efficient and accurate way to get a picture of the investor sentiment behind a stock is to use MediaSentiment Heads Up™ thumbs up / thumbs down recommendations, generated within seconds of earnings releases for publicly traded companies.
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2. The Big Movers and Why
Recently. E-motions was able to tap into a consumer trend on the rise. After releasing earnings on January 24th, with a Heads Up™ thumbs up recommendation, Coach, Inc. (NYSE: COH) went up 10.07% at that day’s high. During the previous quarter, E-motions had run a August, 29, 2005 piece entitled "A weak economy drives down stock prices ... and hemlines". The newsletter described how Coach’s mission statement of “accessible luxury” was an excellent fit with the desires of consumers to feel pampered despite having less to spend:
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Last week Coach, Inc. (NYSE: COH) was up sharply on Wednesday, and a number of high-end department stores were also performing well. All of last year luxury goods conglomerate Moët Hennessy Louis Vuitton reported higher profits world wide, including in the United States. In all of these cases, these high-end goods are outperforming retail as a whole, but what they are selling is an entry-level, toned down version of luxury. For Coach, Inc. its success likely rides on the fact that, while the company produces luxury leather goods, they are in a slightly lower price range than the leather goods of many other big name designers. Meanwhile, LVHM, the conglomerate behind many of the world’s most costly and exclusive brands, is actually making most of its money this year on a new, more affordable denim line, and fragrances and cosmetics, not its bigger ticket items. In the case of high-end department stores such as Nordstrom and Neiman Marcus, the jewels in their crowns are their more-affordable private label items. Like in the early 1980s, consumers are interested in spending less, but still associating themselves with the status of luxury brands, but unlike the age of investment dressing, they are not necessarily saving up for wardrobe classics.
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In the process of covering Coach, Inc., E-motions established a current trend – entry level luxury goods, and then determined that the strong socio-economic motivations behind the trend would ensure the trend’s endurance. Finally, E-motions closed in on a stock that embodied the trend: Coach, Inc. A Heads Up ™ recommended big mover for two quarters, Coach continued to look attractive during Q3. Going forward, Coach, Inc. has plans to expand into the outlet store segment, selling bargain-conscious shoppers Coach leather goods in a lower price range. Outlets of retail companies usually offer a combination of unsold merchandise from the regular line at reduced prices and designed-for-outlet items. While starting an outlet chain can temporarily boost sales and raise brand awareness, in the long term, if something that initially became desirable as an exclusive status item becomes too readily available, it may lose its original appeal. In short, now that the brand has been taken up by early adopters and the early majority, and Coach, Inc. is moving towards the Late Majority and Laggards with outlet stores, it may be a sign that the entry level luxury trend is on the wane.
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3. How to Use the News
While Coach may not contine to ride the wave of a growing consumer trend forever, E-motions created an opportunity for its subscribers to make money, and this week presented a special feature showing MediaSentiment™ subscribers how to get more out of the service. Following E-motions for investing ideas and to learn more about the influence of the media on the market puts smart investors in the right direction. Then, armed with insights from E-motions, they can make the most of almost instant thumbs up / thumbs down recommendations from Heads Up™. Last week, our subscribers had the opportunity to get the MediaSentiment™ advantage on Coach, Inc. as it went up over 10% after releasing earnings.
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4. Last Week in Media Sentiment
Recent correlations between MediaSentiment.com's thumbs-up / thumbs-down recommendations for Heads Up™ rated companies and subsequent day price highs and lows show a strong relationship. The correlation between ratings for MediaSentiment.com selected stocks and their highs and lows the next day is 72%. Therefore, this week, MediaSentiment™ gave an edge up to 72% to smart investors who used Heads Up™ recommendations to trade on intraday highs and lows!
Investors can take this MediaSentiment™ advantage to the next level by adding supply / demand indicators to Heads Up™ thumbs up / thumbs down recommendations, for up to 148% greater profits. Also, MediaSentiment™ subscribers can take advantage of MediaSentiment Trend™ to follow sentiment trends about individual companies, as well as E-motions™ to follow market-wide trends.
All figures reflect all MediaSentiment Heads Up™ recommendations for the week of January 24, 2006 through January 27, 2006, rating companies on the day of their quarterly earnings releases correlated with their stock highs, lows, closing prices and daily volumes for the subsequent day.
5. Links you can use
Coach, Inc.: Alligators, Pythons, and iPods -- Oh My!
Retailers Eye Outlet Stores for Growth
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