10 Top 'Hipster' Stocks
America's indie music-buying, Starbucks-avoiding hipsters are more connected to big companies than you'd imagine. Ironic, right?
1. Apple (AAPL)
The iPhone is the hipster phone du jour, especially when equipped with a Polaroid app and a mixtape case. And one share of Apple, currently hovering around the $400 mark, could buy all three.
Apple is in a class of its own, in terms of fashion and finances. The company enjoys an annual growth rate of over 30%, a 24% profit margin and a $375 billion market cap. Steve Jobs may be gone, but that hasn’t stopped new Apple products from inciting religious fervor in consumer masses.
Just as the mainstream constantly threatens to oppress the hipster, however, cheaper competitors like Android phones and the Kindle Fire continue to nip at Apple’s market share. In the past three months, for example, Apple smartphones constituted 28.7% of the US market, but Android phones made up nearly 47%.
Whether Apple will continue its powerful growth over the next several years is up for grabs. One thing is nearly certain, however. Like skinny jeans, Apple will take a long time to lose its coolness factor.
2. American Apparel (APP)
The purveyor of hipster T-shirts and cotton spandex leggings is true to hipsters’ thrifty roots: American Apparel is a penny stock. Increasing cotton prices and an immigration inspection lost American Apparel 1,500 workers and $86 million in 2010. In 2011, the company narrowly avoided filing for Chapter 11 bankruptcy protection.
To offset its losses, American Apparel sold more than 20% of its stock to private investors at a clearance rate of 43% off. That activity doesn’t bode well for the future value of the stock. Once those investors cash in -- and CEO Dov Charney issues more stock, as is his habit -- American Apparel will find itself right back in the clearance bin.
Due in part to this year’s massive US warehouse sales, the company is reporting an increase in sales for the fourth quarter of 2011. This should help Charney keep enough money in the company coffers to pay off his steady trickle of lawsuits, which include one for firing an LA worker while he was on medical leave with cancer, and a grand total of seven sexual harassment suits. Hey, at least he’s not straight-laced, right?
3. Urban Outfitters (URBN)
Although Urban Outfitters founder Richard Hayne left his hippie roots behind, his Urban Outfitters, Inc. still has a handle on how to cater to America’s retro youth. The ultraconservative billionaire’s brands include Urban Outfitters, Free People, Anthropologie, BHLDN, and the home and garden line Terrain.
The overall outlook for Urban Outfitter's stock price is as eclectic as its apparel selection, thanks in part to Anthropologie, whose poor performance appears to be sinking the stock. Despite recently growing revenue and profit margins, Urban Outfitters is down more than 25% this year. Maybe former Under Armour CEO David McCreight, recently placed as CEO of the Anthropologie Group, can help steer the share ship back on track.
Like American Apparel, Urban Outfitters has some counterculture cred of its own. For one, it’s the only place you can buy retro-boho-vintage-ironic-hipster items like this old-school telephone handset glued to an iPhone case. Urban Outfitters has also been accused of stealing designs from online fashion- and jewelry designers. This could be a case of a corporate fat cat stealing from artists. It could, like Urban Outfitters’ fashion, also just be another case of irony.
4. Groupon (GRPN)
Although the exact percentage of hipsters who buy Groupons is unknown, one-fourth of Groupon’s subscribers are in the millennial generation, which, with a 37% or more unemployment rate, by all rights should be seeking bargain-basement deals. Groupon, meanwhile, is finding out that only 25% of its 115 million subscribers -- those millennials, perhaps? -- are actually buying daily deals. That translates to the company not making $633 million in 2011, despite taking up to 60% of the revenue from each daily deal it launches.
So far, low float is holding up Groupon’s stock value. Something has to give, or someone has to buy more, for the company to stand the test of time and competition. Hipsters, meanwhile, have more daily deals options than ever, including hipster-specific sites like the alt band and brand deal site 1band1brand.
5. Whole Foods (WFM)
On the days the farmer’s market doesn’t provide, hipsters turn to Whole Foods. Judging by the company’s recent performance, all of America is doing the same thing. The grocer that brought organics into the mainstream saw its earnings increase 8% between the third quarter of 2010 and third quarter of 2011. Shares hit an all-time high last December and have doubled over the past two years, leading Whole Foods to up its dividends by 40% in the third quarter of 2011.
Private equity group Leonard Green & Partners bought a 7.7% stake in Whole Foods at the cliff of the 2008 recession. LGP plans to make a threefold profit on its initial $425 million investment by selling 13.9 million shares of Whole Foods at an undisclosed point in the future. Not everyone is as retail-savvy as the former Drexel and Credit Suisse whiz kids at LGP, but it’s pretty apparent that Whole Foods, with a 34% five-year gross margin, good inventory management and cost-control measures, and mass popularity, is a stock to keep an eye on.
6. Pandora (P)
Before Pandora, the only way to create an emo or new wave radio station was to take the time to devise a playlist by hand (or mouse, as it were). Pandora changed all that when it algorithmized the DJ. Pandora has catapulted beyond hipsters and early adopters to a total subscriber base of more than 40 million. Pandora, which had its IPO in July 2011, posted a profit in the third quarter of 2011, and revenue has doubled year-over-year, according to Forbes’ Zack O’Malley Greenburg.
With revenues reliant on advertising and royalties, Pandora needs to focus on ubiquity. Management knows this: Pandora struck a deal with Ford (F) to put the Internet radio in its 2012 trucks; it is also working with Mercedes, BMW, and General Motors (GM). Pandora music nests inside of electronics products like the Samsung Blu-ray disc players. It also recently released a free online concert series.
Still, Pandora’s rhythm is choppy. The company has more than a dozen competitors, including the wildly popular Spotify, threatening its market share. Stock is down 45% since the IPO. Pandora also can’t expand to other countries due to royalties issues. Only time will tell how this tune will turn out.
7. Amazon (AMZN)
What’s more hip, a yellowed, dog-eared copy of On the Road or the same book in digital, in a Kindle with a Moleskine cover? If this year’s holiday sales have anything to say about it, the Kindles win. Amazon claims 1 million Kindles sold each week in December, not least because of the Kindle Fire.
The global online retailer, whose diverse ecosystem of offerings truly does make it an e-commerce version of its namesake, is on a mission. Consumers are picking up the Kindle Fire, a low-priced iPad competitor, like hotcakes. Amazon Prime, with an annual fee just under $80, is probably the best media-access and online shipping deal on the market. Rumors of a Kindle Phone abound.
Amazon is willing to take a loss to branch out into new territory. Heavy corporate expansion and Kindle Fire R&D ate into Amazon’s third-quarter results, putting a damper on the stock, which hit an all-time high of $246 in October 2011. By some estimates, Amazon is overvalued. Note, however, that “boring” is not an operative criticism of the company, and with Amazon’s latest suite of offerings, things are only going to get more interesting.
8. Pfizer (PFE)
There are few better ways to temporarily eradicate existential angst than to pop a hipster’s little helper, the Xanax pill. The Pfizer product, a branded version of alprazolam, instantly transports you from acting like you don’t care to really, truly not caring. The pills work even faster if you chew them, as Jennifer Egan wrote in her award-winning latest novel A Visit from the Goon Squad.
Maybe Pfizer itself is on Xanax. Despite operating in nerve-wracking industry conditions, the pharma giant doesn’t outwardly appear to be panicking. The stock hit a new 52-week high of $21.83 on December 27, 2011, even with the dreaded patent cliff hitting global bestseller Lipitor on November 30. After significant layoffs and major R&D cuts, Pfizer hopes that cornering niche drugs will provide it with opportunities to offset the fallout from various expiring patents, which can take months to fully manifest. Revenues and earnings were up in the third quarter of 2011. The company has both a share buyback plan and higher dividend in the works.
Still nervous about investing in Pfizer? You know how to get some calm.
9. SABMiller (SAB)
Pabst Blue Ribbon, or PBR, has cultlike status among hipsters, mostly because of a guerilla marketing effort in the early 2000s. Besides providing the beer to be seen with in a flannel shirt, Pabst Brewing sponsors indie concerts and film festivals and runs a Drink & Draw contest where users submit various forms of art that “capture the essence” of PBR.
But while Pabst captures the essence of hipsters, MillerCoors, a totally mainstream joint venture between Molson Coors and SABMiller, actually does all the brewing. Mainstream beer sales in the US are down for the third year in a row, according to The Wall Street Journal. America is currently obsessed with craft beers, and the megabrewers are hurting as a result. MillerCoors majority owner SABMiller is putting its juice into emerging markets, hoping to offset the more than 3% stock value loss it had in 2011. MillerCoors itself is also feeling the drain, with net income and sales down in the third quarter of 2011. That doesn’t preclude SABMiller as a value investment, especially if you believe in the success of the Foster’s brands. Nor does it make PBR the independent, countercultural beer it is branded as.
10. Dorel Industries (DIIB)
There’s no indie in Schwinn fixies. Montreal-based Dorel industries, owner of Schwinn, is about as buttoned-down as a company gets. Dorel has a fat portfolio of baby products -- like those “Baby on Board” decals -- home furnishings and several brands of bikes. Thirty percent of Dorel’s sales are to a place whose fluorescent lights make hipsters burn alive, namely Wal-Mart (WMT). And in a salute to that disdained 1%, 70% of Dorel is controlled by one family.
Dorel stock was on the decline in 2011; where it will go next is anyone’s guess, but it doesn’t seemed poised for any major catastrophes outside of its usual range. And despite the multinational’s relationship with soccer mom-mobiles, yuppie road biker jerseys, and business-office Ameriwood desk sets, hipsters still ride Schwinn fixies.
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