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Bricks-and-
Mortar Stage
A Comeback
To the Editor:
This article covers a lot of significant developments
quite well (“Retail Revival,” Cover Story, Nov. 12). I
have two thoughts. First, large numbers of digitally
native chains have found that adding physical stores
improves their profitability through improved cus-
tomer engagement. As an example, consider Allbirds’
recent and successful initial public offering. What
matters now is the reinvention of mall stores.
Second, many of the chains they are replacing were
highly indebted, a lot of them in consequence of having
been “bailed out” by private equity across the 2008-09
recession. Give me liberty or give me death, but Lord
save me from a private-equity bailout.
So now we have a whole bunch of avant-garde,
financially sound firms driving the next (of many over
time) retail renaissance.
I’ve made a lot of gains on this by owning Simon
Property Group, but those who successfully played the
retailers made more.
R. Paul Drake
On Barrons.com
Melodious Small-Caps
To the Editor:
Nicholas Jasinski’s outstanding as-
sessment of small-caps was more
than just music to my ears. It was
melodious, as I have been waiting for
years for his scenario to materialize
(“Small-Cap Stocks Are in Line to Be
Big Winners in 2022,” Sizing Up
Small-Caps, Nov. 12).
I would add only one thing. The
performance dispersion among indi-
vidual small-caps will be substantial.
Yes, the indexes will outperform
large-caps, but the notable factor is
that they will be led by a cluster of
stocks that will do extremely well.
The remainder will remain, in vary-
ing degrees, “value traps”—statisti-
cally cheap but with no catalyst to
spark a favorable change in investor
perception.
A great example of a catalyst
sparking an upside move can be
found in your coverage of Meritor on
Oct. 1: “This Overlooked Parts Maker
Is Ready for an EV Future. Its Stock
Could Double.” The catalyst is the
emergence of its electric powertrain
technology for commercial vehicles.
In fact, your article in itself was a
catalyst in bringing it to the invest-
ment community’s attention. And the
stock has reacted. As of Monday’s
close, it’s up 22% since your article.
And there’s still considerable room
to run, with the stock trading at only
seven times the 2022 earnings-per-
share estimate of $3.93.
Keep up the good work with your
excellent small-cap coverage.
Rob Suthe
Bethesda, Md.
To the Editor:
Nicholas Jasinski correctly points out
the edge the S&P 600 enjoys over the
Russell 2000 in various areas. It’s
estimated that over 40% of Russell
2000 companies are losing money.
Though S&P is the only index pro-
vider to have a profitability require-
ment for its size-segmented indexes,
Ned Davis Research estimates that
nearly 25% of S&P 600 companies
also lose money. Earlier this year,
GameStop, the meme-stock wunder-
kind, was part of that index, even
though it was losing money. So
where’s that profitability screen? I’ve
attempted to get an answer to that
question from S&P Indices, but
reaching its data people is as difficult
as trying to make a phone call to
China with a rotary phone.
MaybeBarron’seditors will have
better luck than I did.
Bob Kargenian
Orange, Calif.
Not So Renewable?
To the Editor:
Avi Salzman questioned David Heik-
kinen fairly well on his information
about Enviva Partners (“These En-
ergy Stocks Could Double. What to
Buy Now,” Interview, Nov. 12). How-
ever, what Salzman didn’t ask about
and what Heikkinen didn’t divulge is
that Enviva Partners has the capacity
to produce over six million metric
tons of wood pellets per year, and
most of that is exported to Europe
for power generation.
I doubt that the material for the
pellets is all waste; rather, Enviva uses
trees, and a tremendous amount of
them. I think you should have drilled
into this information about Enviva, as
a company that employs such an envi-
ronmentally harmful process may not
be as renewable as one might think.
Ted Fisk
Naperville, Ill.
Different Ballgame
To the Editor:
Having worked in China in the hal-
cyon days of the ’90s, I think we are
whistling past the graveyard if we do
not recognize the profound change
occurring under the leadership of
President Xi Jinping (“U.S. Compa-
nies Face New Risks in a Changing
China. What That Means for the
Stocks,” Nov. 12). He has solidified
his power with generational leader-
ship in mind, a la Mao. It’s a very
different ballgame.
I’m not suggesting cataclysmic
changes, but there’s no doubt that
we are much further out on the risk
curve then many may think. Taiwan
comes to mind, and how the Biden
administration reacts.
Grod Ross
On Barrons.com
Inflation Gauge
To the Editor:
The Federal Reserve may be behind
the curve because it has been project-
ing transitory inflation with one of its
gauges, the labor-force participation
rate, or LFPR, which has been
skewed by the definitional language
of a worker receiving unemployment
compensation, or UC (“Inflation Has
Run Hot for a Long Time. The Fed
Knows It,” The Economy, Nov. 12).
Unemployment compensation
pays workers who lost their job
through no fault of their own “while
they are looking for work.” If a
worker is receiving benefits under
the UC program but not accepting a
job, which appears to be the case for
10 million workers, they are being
counted as workers, making the
LFPR inaccurate.
Douglas Nutt
Greenwood Village, Colo.
“Give me liberty or give me death,
but Lord save me from a private-
equity bailout.”
R. Paul Drake, on Barrons.com