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3/8/2017 8:32:36 AM Eastern Time

Riding the Wealth Effect
By Charles Payne, CEO & Principal Analyst

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Okay, the market is soaring as U.S. consumer and business sentiment soars, which are the key ingredients in the so-called “wealth effect.” Feeling prosperous and acting prosperous are two different issues underscored by the fact that folks didn’t spend money during the record-breaking rally under President Obama. Even plunging gas prices didn’t move the economic needle; on the contrary, shelved construction work and job layoffs had a net-negative impact on the overall economy. One of the dirty little secrets is that most American households have more cash after expenses (real disposable income of $39,430) than at any time in American history. There have been two major waves for disposable income since the Great Recession:

Long Idea: SOTHEBY'S HOLDINGS INC. (BID) @ $47.73
Industry: Specialty Retail, Other
Click here to view the trading alerts that followed this recommendation

Trading Parameters
Status Open
Entry Price$47.73
Entry Limitsee comments
Stop LossN/A
Target$60.00

BACKGROUND: Sotheby's (BID) has overcome lots of concerns from management issues to would-be competition from the Internet. The fact is, there is one Sotheby's and one Christie's, period. I am watching record prices for new artists from around the world. Just this week, ‘The Beautiful Ones' by Njideka Akunyili Crosby releases an artist World Auction Record, selling for £2,517,000 at Christie's.

SKINNY: The stock has rallied to $53.00 on numerous occasions, but my 52-week target for the stock is $60.00.




Long Idea: Harley-Davidson Inc (HOG) @ $57.78
Industry: Consumer Discretionary; Recreational Vehicles
Click here to view the trading alerts that followed this recommendation

Trading Parameters
Status Open
Entry Price$57.78
Entry Limitsee comments
Stop LossN/A
Target$70.00

BACKGROUND: Harley-Davidson Inc. (HOG) has the reputation of bad-ass, leather-clad dudes riding up and down the coast looking for action, but the needle on the income statement and stock price comes from older rich dudes looking for a weekend getaway. Management has done an amazing job spreading its buyers, which should serve it well in the future; right now, sales are down in America, and that will probably turn as the wealth effect moves into higher gear.

SKINNY: I am looking for the stock to rally to $70.00 by year's end.




Long Idea: Thor Industries Inc. (THO) @ $104.01
Industry: Consumer Discretionary; Recreational Vehicles
Click here to view the trading alerts that followed this recommendation

Trading Parameters
Status Open
Entry Price$104.01
Entry Limitsee comments
Stop LossN/A
Target$156.02

BACKGROUND: Thor Industries (THO): The stock got clobbered on the perfect earnings report, which happens far too often, shaking out many investors, but providing those that peel the onion a chance to enter. The stock should hold above $98.00, and then build a base before turning higher. The company's backlog is up almost double to $2.0 billion.

SKINNY: I spoke with the CEO, who thinks this stock will rally 50% in the next two years.





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