Stocks Just Have to Outrun China

 | Feb 01, 2014 | 7:30 PM EST
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It's a giant footrace, a footrace to outrun the decline in China, and it has become so all-encompassing so as to distort almost every conference call of every international company that I follow.

Take just last Friday. It starts inauspiciously enough with chatter from MasterCard (MA) that, of course, the slowdown in China matters, but the ascension of the U.S. economy and the stabilization of Europe, plus the great secular trend from paper to plastic will remain a tailwind.

It didn't matter. That, plus the guide down relative to a lost account, makes for a big give-up and a long-loved stock becomes a pariah in a nanosecond. But I am sure that if China hadn't ticked down it would have been a totally different story. It would have been one where the company would have said "the increase in China will more than make up for the loss of even a very big customer." The Chinese consumer's slowdown is real, CEO Ajay Banga said on his call, "but China's growth has slowed in domestic expenditure, which impacts us very little because we don't get to play in the domestic processing." The saving grace of in-country slowing, I guess.

Take Weyerhaeuser (WY), the gigantic lumber company. It went out of its way to say that while China was slowing, Abe's economic growth plans are giving Japan a needed spur and that Japan homebuilding can offset China. Again, if China hadn't slowed you would have had a terrific Asian story to tell. WY defaulted to the old-but-true saw that the Chinese are still experiencing the great rural-to-urban migration. But when we hear that these days we just think about the see-through skyscrapers that are always being talked about and we know that the crane business, so integral to urban building, isn't doing so well or Caterpillar (CAT) would have crowed about it.

The China saga also dinged Mattel (MAT), although the slowing of all of its key categories (dolls, infant, preschool and vehicles), underperformed its U.S. categories. Mattel at least had a demographic comeback to any slowdown in China, which is the relaxation of the one-child policy that could spur growth among infants. I know that Kimberly's (KMB) feeling the same way as diaper sales are still growing in the million-person hinterland towns.

Just the day before Diageo (DEO), the worldwide liquor conglomerate crushed its own stock when it talked about the great spirits clampdown going on right now in China, where the Party has done its best of late to tamp, well, the party.

Not all had negative things to say. Wynn's (WYNN) stock took off when management said Macau was performing terrifically, driven by strong mass-market revenues. Perhaps the no-longer-sanctioned vodka drinking has driven more Chinese to the Macau tables where what happens in Macau stays in Macau.

It's a great quandary to me that Honeywell (HON) and United Tech (UTX) cited some terrific urban development for their climate control and elevator businesses. Honeywell's 13% growth in China was exceptional and CEO Dave Cote called it out specifically when he ws documenting that the world was "slightly improved" when he came on "Mad Money." Jim McNenery, in his now overly-reviled Boeing call, certainly had nothing bad to say about China.

But IBM's (IBM) Chinese sales were colossally bad, as bad as J.C. Penney's (JCP) comparable-store sales, to use a horrendous benchmark, and the company cited changes with the state-run companies and how their spending is slowing. I bet Cisco (CSCO) says the same when it reports, although I don't think, at last, it will be much of a surprise.

China's become such a downer that I wonder if Apple's (AAPL) China Mobile deal is widely being perceived as a bust already because of the slowdown in Chinese spending. Talk about a company that can't catch a break.

In the end, you want real irony? Contrast Yahoo! (YHOO) with Google (GOOG). Yahoo's stock had more than doubled during CEO Marissa Meyer's tenure, but almost none of that has had to do with her initiatives, so far. It's all about Chinese internet site Alibaba, which, alas, has slowed, too. But Google? Its stock flew 40 points in a horrendous market. It's doing everything right, and it didn't have to explain away China. After all, it doesn't do business there.

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