Reese: Don't Believe The Tapped-Out-Consumer Tale

Validea CEO John Reese says in his latest column that investors shouldn’t fall prey to the “tale of the tapped-out consumer”.

“In the investing world, putting stories ahead of facts is very dangerous,” Reese says. “According to this story, the housing market crash, stock market implosion, and near-collapse of the entire financial system dealt U.S. consumers a knockout blow in 2008, one from which they wouldn’t be able to recover for years, perhaps even decades. Huge declines in consumer spending would mean years of struggle for the economy, and for retail firms in particular.”

Like most tall tales, Reese says the tapped-out-consumer story was grounded in some truth, but eventually took on a life of its own. But since mid-2009, consumers have actually rebounded quite nicely, Reese says, citing several key data points. “Still, the tapped-out-consumer story lingers,” he says. “And that’s good. Because when the story and the facts diverge, opportunities are created.”

Reese looks at five stocks that currently get approval from his Guru Strategies — each of which is based on the approach of a different investing great. Among them: Genesco Inc., which gets high marks from his Peter Lynch-based model.