Sacked by Guidance

 | Feb 05, 2014 | 3:25 PM EST
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Nobody knows who and what to trust. That's what's happening right now and it is incredibly intimidating to both home gamers and professionals alike.

There seems to be two sides to every story and the vast number of times in this market, the ugly side is taking precedence even as, initially, the positive side seems to be winning. These reverses, where forward progress doesn't matter, are shocking people and making so many rethink the possibilities of making money at this very moment.

First, let me say that, for now, the market is dominated by traders, particularly those who believe that the market must fall maybe 5% or more before it finds its footing. That overarching view on the S&P 500 in a market where futures and ETF trading color everything is setting a perturbing tone -- one with tremendous gravitas because we have a potentially hideous employment number just two days away.

Let me give you some brutal examples of what I am talking about, ones that are vicious, where the bulls look like they've caught beautiful passes only to fumble the ball after a collision with a Richard Sherman-type, short-selling Seahawk.

First, there's Buffalo Wild Wings (BWLD). We got a nice surprise up last night, as the consistent bar/restaurant gave you a $0.03 surprise plus a nice beat on same-store sales. The stock flew up almost 3% after hours and you felt great if you owned it. But during the conference call later, the company indicated that this current quarter got off to a weaker start and the next thing you know Goldman Sachs was lowering its price target because, and I quote, there is "limited visibility." The stock gets laid to waste, dropping 14 points.

The same thing happened with Polo Ralph Lauren (RL) this morning. You have to love this one from the get-go with a release that says, "Ralph Lauren reports better-than-expected third-quarter fiscal 2014 earnings." Not a lot of subtlety there. But just like I preach in Get Rich Carefully, you have to wait until the guidance portion of the conference call to make a judgment, which clearly people didn't do because the stock was trading up 9 points at the open as the crowd thought they had another Michael Kors (KORS) on their hands. Wrong. Deep in the bowels of the guidance was a mention that gross margins are going to be less than expected. Holy cow, you know the drill, a company has to beat the high man in sales and earnings and offer perfect guidance with terrific gross margins. Next thing you know you have a 15-point swing on your hands, a sack well behind the line of scrimmage.

Then Estee Lauder (EL) announces earnings that were solidly better, which is so typical of this fabulous cosmetics company. I could see it roaring because it looked like the rich are still spending hand over fist for expensive-smelling water. Whoops, in the actual release (at least you didn't have to wait until the conference call) the company said that the pace of the increases can't be maintained because of slowing in China, Hong Kong and the U.S. That was a stunner, and the stock has been hammered down 3.5 points.

Then there's Wynn Resorts (WYNN). This company just four days ago gave us an all-systems-go outlook on Macau, the hottest mecca for gamblers in the world. Then last night we get January Macau numbers and they are soft. How could that be? How could Wynn just tell us it is expanding like mad when the same month that it highlighted strength, there was actual weakness? I believe that January was an aberration. I like Wynn, I can't back away from it, but others sure are with the stock off a quick 5 points.

All of these were supposed to be in the bag. They even looked in the bag, but they were anything but. Consequently, those bulls who took action were simply drilled -- run over with a foul-smelling, rancid-chicken, ripped-blazer of an outlook that was devastating in its bipolarity.

When you have that kind of solid quarter, a tepid outlook calls into question everything else you thought might be good. It does make you like a Kors, Chipotle (CMG), Google (GOOG), Netflix (NFLX) and Under Armour (UA) more for their scarcity value -- the scarcity of the top and bottom line beat and fanatical guidance raised.

However, it just turns the game on its head, and you start wondering, "How can I do any buying of anything before I see every bit of the company's financials, and then how can I trust that things haven't slowed since then, especially in light of the Wynn comeuppance?"

It makes for tough sledding. And that's why we can't -- despite good bounces in stocks that have totally been pancaked -- get too excited about the prospects going forward.

The saving grace? We've been beaten up so long that if we get any good news on any front, Labor Department or otherwise, we might be able to say enough with the selling. Let's figure out who, besides Under Armour, Google, Kors and Netflix, could put still put a good year together. After all, it's only Feb. 5.

So, let's stop the selling and examine the implications of a CVS Caremark (CVS) dropping cigarettes and pick up Walgreen (WAG), Rite Aid (RAD) and Dollar General (DG), which will get that die hard (or I guess you could say sooner-to-die hard) butt-buying traffic. Let's look again at the recession stocks -- Hershey (HSY), Kellogg (K), and PepsiCo (PEP), which have finally caught a bid, and finally do some buying.

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