9 stocks taken to the woodshed
Companies that miss earnings estimates often get a hiding from investors.
Economic growth depends upon consumer spending and success from small businesses. Today I profile nine stocks that have recently been taken to the woodshed following negative company-specific news.
It appears that ladies have cut their spending on luxury leather goods while fewer men are adding to their business wardrobes, and that pet owners have their dogs and cats on diets.
Spending on information technology seems to have slowed both on home IT networks and at small businesses.
Wednesday, we learned that advanced Q4 GDP came in with a slight contraction of 0.1% when a modest 1.3% expansion was expected. Attributing to the weaker than expected report were; cuts in government spending, slower exports and sluggish growth in inventories.
On Tuesday, we learned that The Conference Board's Consumer Confidence Index surprisingly slumped to 58.6 in January down from 66.7 in December to the lowest reading since November 2011. The chart, below courtesy of "dshort" at Advisor Perpectives, shows this index well below the neutral 90 to 110 readings.
Thursday morning, www.ValuEngine.com shows that 62.4% of all stocks are overvalued, just below our 65% warning threshold. All 16 sectors remain overvalued with nine overvalued by double-digit percentages: Consumer staples by 28.2%; transportation by 24.4%; construction by 23.6%; industrial products by 21.0%; finance by 16.6%; medical by 16.2%; retail-wholesale by 15.9%; computer & technology by 15.2%; and business services by 10.5%.
Technically, the Dow Jones Industrial Average ($INDU) has an extremely overbought daily chart, a weekly chart that is nearly overbought, and a monthly chart that is overbought. The Dow has been knocking on the door of 14k solid gold, with the October 2007 all time high is 14,198.10, and the all time closing high at 14,164.53 set on Oct. 9, 2007. My quarterly and semiannual risky levels are 14,118 and 14,323.
About 85% of the stocks in the S&P 500 ($INX) are above their 200-day simple moving averages, which is a warning of a potential reversion to the mean.
Here are my buy and trade strategies for the woodshed stocks:
BMC Software (BMC) ($41.47) missed quarterly earnings and the stock dropped from $44.48 at the close on Jan. 28 to a low of $40.00 at the open on Jan. 29. The stock has a "hold" rating and is on the cusp of its 200-day SMA at $41.50. My monthly value level is $40.60 with a semiannual pivot at $42.30 and weekly risky level at $42.97.
Coach (COH) ($51.55) missed quarterly earnings and the stock plunged from $60.68 on Jan. 22 to a low of $50.47 on Jan 23. The stock has a "hold" rating and gapped below its 200-day SMA at $59.61. My monthly value level lags at $41.13 with a weekly risky level at $54.42.
Jos. A. Bank (JOSB) ($40.25) reported in an 8-K filing after the close on Jan. 25 that net income for 2012 would be reported approximately 20% lower than in 2011. The stock ended last week at $46.27 and traded as low as $37.31 on Jan. 28. The stock has a "buy" rating and plunged below its 200-day SMA at $44.93. I do not have a value level with a weekly pivot at $41.51 and weekly risky level at $44.39.
Lexmark International (LXK) ($24.15) missed quarterly results in a big way and the stock gapped from $27.95 at Monday's close to a low of $23.28 on Jan. 30. The stock has a "buy" rating with the stock on the cusp of its 200-day SMA at $24.01. My semiannual value level is $21.83 with a weekly risky level at $26.99.
NETGEAR (NTGR) ($36.15) pre-announced Q4 sales during the day on Jan. 29 that were well below analysts' estimates. The stock closed Jan. 28 at $40.83 and traded as low as $35.90 on Jan. 29, which was a test of the 200-day SMA at $35.90. The stock has a "hold" rating with my monthly value level at $33.60 with a quarterly pivot at $38.62 and semiannual risky level at $41.75.
PetSmart (PETM) ($65.10) fell on a Wall Street downgrade that cited competition from Amazon.com. The stock ended last week at $69.99 and traded as low as $62.63 on Jan. 28. The stock has a "buy" rating and broke below its 200-day SMA at $66.69. My semiannual value level is $62.22 with a weekly pivot at $67.83 and quarterly risky level at $73.81.
Stratasys (SSYS) ($77.25) plunged on the popping of the bubble in 3D print companies. The stock traded as high as $92.30 on Jan. 22 and as low as $76.40 on Jan. 29, still well above its 200-day SMA at $61.60. My semiannual value level is $69.09 with a monthly pivot at $77.52 and weekly risky level at $87.07.
Seagate Technology (STX) ($33.89) beat EPS estimates by 11 cents, earning $1.38 per share, but the company warned, and the stock fell from $37.41 at the close on Jan. 28 to a low of $33.60 on Jan. 29. The stock has a "buy" rating and remains above its 200-day SMA at $29.16. My quarterly value level is $29.58 with a semiannual pivot at $34.43 and weekly risky level at $39.57.
VMware (VMC) ($77.65) missed EPS estimates and plunged from $98.32 at Monday's close to a low of $76.33 on Jan. 29, breaking below the 200-day SMA at $93.84. My monthly value level is $71.52 with a semiannual risky level at $82.46.
At the time of publication the author held no positions in any of the stocks mentioned.
More from TheStreet.com
Copyright © 2014 Microsoft. All rights reserved.
The company is scrambling to protect its equities arm, which could face declining volume and revenue as competitors close the gap.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.