Williams-Sonoma Inc. (WSM)

(A Top Pick June 13/16. Up 4.12%.) Hasn’t quite seen some of the run-up that she would like, or some of the same store sales growth she had been hoping for. From a valuation point of view, she now considers this as a Hold. The well-heeled consumer will remain, but the real growth in the economy is more from middle America, and this company is just not going to participate in the growth as much.

She bought this after the big dive, thinking of very good top line trends in housing growth. It seemed like the issues were temporary. Port strikes messed up their inventory. She was expecting a bit of an improvement in the last quarter, but they went and announced all their spending plans. That put some pressure on the stock and there are some competitive pressures coming. Trimmed half her position, and is waiting to see how this quarter turns out. Thinks the next quarter or 2 are going to be very important.

US housing sales are really ramping up. Consumer discretionary, especially the retail stocks, have really been beaten up, and this is trading at a good valuation. However, the key thing is that they need to have great online sales. This has one of the strongest online programs. About half their sales come from online sales. Very good growth and very good earnings. Trading at 14X earnings.

Missed same-store sales estimates, and it takes a little while to work through that. They’ve had a change in management. Recently announced a half a billion-dollar buyback which is a good sign. They are free cash flow positive. The negative earnings revisions have not turn positive yet. He would want to see it prove itself a little more.