Once you get past the hype, there's little chance for long-term gain with this stock.
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Investments that don't seem strong now might not be as bad as you think in the long-term.
"For most private investors, the bad news is good news for stocks story just doesn't pass the smell test." -- @PaulKinglsey
I saw that tweet Monday morning and I wrote in return that "it's always been like this."
The follower then came back to the effect that even if it is has always been like this, that doesn't make it right.
And there's that word again: "right." I think that "right" has to be the most expensive word in the business. This is not an ethics class. It isn't an exercise in some bizarre form of justice.
Yet what seems obvious to me appears opaque to others. I seem like someone who wants to get away with something, while those who think it's not right represent the true path of reason.
How did this happen? How could so many people feel like @PaulKinglsey?
Debunking the tweet's misperception is central to trying to figure out the next leg of this market because it holds the key to whether stocks can attain a higher level than we have reached already.
First, there is no smell test. When you invest in stocks you are trying to divine the direction the market will take. That requires lots of history, lots of pattern recognition and a lot of homework. Some, such as technicians, often think pattern recognition is all that matters.
Others think the whole exercise is wrong and they look at stocks as an investment class that has done well over time so you need to own some of it.
The option I like looks at pattern recognition and the quality of the asset class. I believe the best-of-breed stocks within that asset class can be discovered and exploited.
Nowhere within the trio of reasons to own stocks is a smell test. What you are betting with when you invest when bad news is good news is the history leading up to when the economy flips into high gear and good news is good news. That's an explosive time for the market and you have to invest during the bad-news-is-good-news phase in order to reap the biggest gains. In other words, you have to be early and you have to anticipate.
If you wait until @PaulKinglsey wants the market to smell good, you have probably missed a great deal of the move.
Now here is where a lot of judgment gets clouded. There are plenty of people who believe the Federal Reserve is life support for the stock market and when you take away the life support the stock market dies. These people do not know the history of the market, as encompassed by don't fight the Fed and don't fight the tape. Or, since the polarizing world of President Obama and Congress, they are so blinded by politics that now infects even the process of making money in the market.
I think it is a false link. Those who believe in the politically incorrect nature of what happened in this run -- that it is spurred only by the Fed -- missed out on tons of money. I often think they don't care. That's because they are not investors. They are politicians masked as investors. Their views have to be avoided at all costs because they are not central to the process.
Second, those who think that the stock market can never transition into an earnings-derived advance don't understand sector rotation. When they say "this market," they are simply being brainwashed by trading in the futures as a market as a whole. That, too, is not investing. That's asset-class choosing and it's been dead wrong, too. The dominant asset class success story in my lifetime has been in the fixed income world, not stocks. The 30-year Treasury offering has by far been the best risk-reward during my career, which began in 1979.
But if you are a stock picker, you know that the most enjoyable, even most predictable, element of the market comes when earnings aren't manufactured by cost cuts but are generated by higher sales overlaid on a lean organization.
That's where we are now. That's what we saw Friday. We are getting many signs that the international companies that are based here are now experiencing the transition from earnings-oriented investing -- something that's been quite bountiful -- to sales-oriented investing. When that occurs, the market can really gallop.
In the meantime, there are plenty of people still betting that the tapering will be held off. They are the Clorox (CLX) investors, still attracted to slight growth with some yield. There are so many hedge funds betting against a limited batch of securities like Clorox that there is a bizarre funnel effect of shorts covering, longs unwilling to sell because of gains and a nice dividend, and outright share repurchases that shrink the float. There were 153 million shares of Clorox a little more than five years ago and now there are about 132 million. That missing 31 million explains more of the move than people realize. It makes for hard shorting and easy owning.
Now it is true that we could lose Clorox in the transition to higher earnings, although that sure hasn't happened yet. But anyone who knows the history knows that we should now be shifting to the bank financials. The money should come out of the non-bank financials as well as from the rest of the market and flow right into the banks. They haven't been allowed to shrink the float because the government keeps them from doing so, but it could occur soon.
These investors might be drawn to technology, especially now that the personal computer class of tech seems to be bottoming as we have seen from the moves in Microsoft (MSFT), Western Digital (WDC), Seagate (STX), Hewlett-Packard (HPQ) and, most recently, Intel (INTC). And they might be interested in retail recognizing that things could get better than they are right now if the economy improves because of the possibility of more jobs and therefore more disposable income.
The political types are already citing the new healthcare regime as a reason to sell stocks, but that might prove to be wrong because the large companies are precisely the ones that can navigate these new waters. Their smaller-capitalization and private small company rivals are the ones that should fall by the wayside. That will soon be seen as logical, but a lack of business savvy by the White House didn't see this coming any more than it didn't see the website issues coming.
So, to sum up, the smell test does get vindicated back-handedly by transition that has historically occurred now. The investing that has come previous to this moment is from people who recognize that bad news has historically led to good news and they have been driven by individual stock performance as well as pattern recognition. The asset class hunters and the corporate buybacks have been convenient props to the whole process, which is why this move that is so explosive, the one that shouldn't be happening, is indeed prevailing.
I feel badly for those who wait for things to smell better. They may not know history. They might be confused by politics and the need to have a balance between a bull and a bear debate driven by politics. But they, in the end, shouldn't be pitied. They convinced themselves they were right and by doing so they were perfectly willing to forgo the gains to date.
I think they will most likely forego the next set of gains, too. A combination of blindness from the inability to believe that stocks can really rally under Obama, coupled with an underestimation of the Federal Reserve's will, abetted by the non-political historical buyers who are not now going to turn sellers precisely because they know the history and fear a stock shortage among seasoned equities -- the IPO market has provided tons of unseasoned and often disrespected fodder -- could end up propelling us to the next level. Oh, and believe me, to these purists, that advance will stink to high heaven, too.
Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.
Jim Cramer's Action Alerts Plus: Check out this charitable trust portfolio and uncover the stocks Cramer thinks could be winners.
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If the stock continues to move lower and tests long-term support, there is reason to jump in.
By Neal Rau
Carbonating water at home is growing fast, and shares of SodaStream International (SODA) have rewarded investors.
Many consumers are looking for healthier options to regular soda or diet soda. SodaStream has been able to tap that market and continues to rapidly grow its brand. The stock has returned 24% this year, though shares were down sharply after the third-quarter earnings report.
Is the pullback a buying opportunity?
There are many advantages to making your own soda at home. You can choose what type of ingredients to use, and spend a lot less than what you pay in the store. Your homemade soda will also reduce the plastic bottles that are bad for the environment, and many people like this.
The social media stock surged in its first day of trading. But in the month since, shares have gained only 5 cents.
By Jonathan Berr
Shares of Twitter (TWTR) surged 73 percent in their first day of trading Nov. 7, jumping from an IPO price of $26 to close at $44.90. In the month since that market debut, the stock price has gained just 5 cents.
Even that meager increase is impressive compared with, say, Facebook's (FB) first month of trading, in which the social networking giant’s stock plunged 20 percent.
And Twitter's performance is all the more remarkable given that skeptics continue to raise questions about whether its growth rates are sustainable and whether expectations that it will be profitable in 2015 are realistic.
|Tags:||The Fiscal Times|
The Fed may start tapering in just a few months. Here are a few of the likely winners and losers.
Second, the Fed will ease off its massive stimulus program (known as quantitative easing, or QE), which is likely to allow long-term rates to rise to levels that truly reflect global economic activity. (The QE program has kept a lid on long-term rates.) I discussed this notion a few weeks ago in my look at the soon-to-change yield curve.
Saks, Tommy Bahama and other retailers are adding alcohol to their locations, hoping that shopping under the influence helps their bottom lines.
Endless lines. Pushy crowds. Hearing "The Twelve Days of Christmas" for the umpteenth time in a matter of hours. Spend a little time shopping this holiday season, and odds are good you'll want a good stiff drink.
Not that you need to abandon your basket to grab one. More clothing retailers are branching out into the cocktail scene, offering customers the opportunity to pause mid-shopping trip for a drink and small plates of food.
Just hang a right at menswear and walk past women's shoes to the in-store bar.
Saks, Urban Outfitters (URBN) and Brooks Brothers are among the brands that have recently announced plans to build out bar and restaurant spaces in stores. Old hats at the restaurant-retail combo are expanding, too.
There's reason to believe a reduction in the Fed's bond purchases has already been priced into the action.
Investors avidly awaiting signs that the Federal Reserve is ready to reduce its monthly stimulus may find that the news already has passed them by.
Tapering, as the market calls it, easily has been the market's main concern, and in fact only worry other than sustaining the modest growth in both earnings and gross domestic product.
That worry began in May of this year when Fed Chairman Ben Bernanke first raised the prospect during a congressional hearing, and speculation over when it may start has been a major market-mover throughout.
Finding companies set for solid profit increases at a reasonable price is always a winning strategy. By that standard, here are next year's most appealing firms.
In a tough economic environment, food companies are sharpening competitive strategies. Here's how 3 biggies have fared recently.
By Karen Riccio
Investor Steve Cohen boosted his stake in The Fresh Market (TFM), a hedge fund cut its ownership in Safeway (SWY), and Kroger (KR) reported disappointing third-quarter earnings -- and all this action happened in just the past couple of days.
It's just another frenzied week in the grocery industry, as huge chain stores fight for consumers' dollars and loyalty on a daily basis.
In a fiercely competitive environment with low margins and high stakes, the chains must cater to all types of grocery shoppers, their wants and needs, tend to the little idiosyncrasies and keep customers coming back. That’s no easy task. One bad experience can easily send a shopper packing for another store.
Welcome to the world of grocers, where repeat business is king and the key to success.
The company's opportunity in the Middle Kingdom will be a significant catalyst for the stock, says 1 analyst.
BMO Capital upgraded LinkedIn shares Friday and also raised its price target. The firm believes that the company will be officially launching in China soon, and may be able to monetize that geography as soon as 2015. The social networker already has 3 million users in China.
The rollout of the new national health care plan has been far from perfect, but some sectors may get an Obamacare bump.
The rocky rollout of Obamacare is in its second month and there are still a large number of uncertainties hanging over the healthcare industry as a whole.
For starters, the website is still experiencing issues holding back the potential number of people that could be enrolling. Then there is the one-year suspension of the employer mandate and now cancelled plans can be kept for another year.
All in all, the plan has not enjoyed a smooth introduction to the public. However, there is still enough data out there to suggest what the end result may be for some health care sectors. For example, more people with health insurance equals a higher demand for health care services and products, including drugs.
Shares of the food company are up nearly 50% this year, and it's hard to justify buying in now at $45.
By Richard Saintvilus
NEW YORK (TheStreet) -- There's not much a company can do when the Street has fallen in love with its stock. While some management teams will look for opportunities to play down expectations, there are companies, like Hormel (HRL), that revel in the challenge, especially when they know their growth prospects are actually better than perceived.
But I believe Hormel's stock, which has posted year-to-date gains of close to 50 percent, is expensive. I'm saying this even though I know that the company has a long history of margin expansion and above-average growth. Not to mention, when it comes to strong returns on capital, Hormel has compared favorably to other well-established brands, like Nestle (NSRGY) and Kraft Foods (KRFT), which I happen to like.
The cosmetics company's disappointing earnings report is yet another illustration of how difficult the retail sector has become.
"Tougher-than-expected sales environment . . . heightened promotional environment . . .
heightened promotional environment of the holiday season . . . highly promotional holiday season . . . highly promotional holiday season . . . less certain consumer environment . . . an environment that looks to be more promotional."
Believe it or not, these were all heard on one conference call Thursday night: that of Ulta Salon (ULTA), following a report that showed a quarter going steadily downhill as the months dragged on.
If you don't know Ulta, then you don't know the high-growth retail world. It's a world where some companies believe that there is endless demand for more stores, and that the idea, when executed properly, never runs out.
The company leans on the electric-car maker for help providing power when the sun isn't shining.
One of the biggest bearish arguments against solar stocks has always been the simple fact that the sun doesn't always shine.
Musk is one of the original founders of SolarCity and sits on the board of directors. Musk's cousin, Lyndon Rive, is the company's CEO.
According to Businessweek, the batteries will be available to commercial customers at first. The company is conducting pilot tests with its residential customers in California.
The retailer labels the character's fake memoir as nonfiction. This comes weeks after it categorized the the Bible as fiction.
By Karl Utermohlen
Costco (COST) put "Anchorman" character Ron Burgundy's faux memoir in its nonfiction section, marking the second time in weeks that the retailer has made an embarrassing book-labeling decision.
Some Los Angeles branch employees must not know much about pop culture, as they thought Ron Burgundy (pictured) was real, according to The Daily Mail. "Ron Burgundy: Let Me Off at the Top! My Classy Life and Other Musings" is a memoir based on Ron Burgundy's fictional life from the 2004 movie "Anchorman."
The blunder comes weeks after a pastor posted a photo on Twitter of the Bible being labeled "fiction" in a Costco store. Many Christians vowed to never shop at Costco again after seeing the holy book in the fiction section despite the company’s apologetic remarks.
Jeff Bezos knows how to get the media excited about his company. But is that enough?
As the Thanksgiving weekend wound to a close Sunday night, I happened to watch the "60 Minutes" interview with Jeff Bezos, the billionaire CEO of Amazon.com (AMZN).
At the end of the interview, Bezos (pictured) unveiled a "surprise" for correspondent Charlie Rose and his TV viewers, revealing that Amazon is working on building flying drones that can deliver packages directly to customers.
I thought that was maybe a bit far-fetched, but certainly interesting. However, the media grabbed onto the drone story and ran with it. All day Monday, every news channel I watched -- financial and otherwise -- was talking about Bezos, Amazon and drones.
Bezos certainly knows how to create a buzz. What has yet to be seen is whether he can generate profits for Amazon shareholders.
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If the stock continues to move lower and tests long-term support, there is reason to jump in.
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[BRIEFING.COM] There wasn't a lot of excitement in the stock market today and there is nothing wrong with that. After rallying in broad-based fashion on Friday, the major indices stood their ground (for the most part) amid a lack of conviction from buyers and sellers alike.
Today wasn't a case so much of the stock market going up as it was a case of some influential stocks going up to keep the major indices on a winning path. In fact, decliners were just about even with ... More
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