A Dangerous Game

 | Mar 05, 2013 | 6:00 AM EST
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It's difficult when we all know it's too high, isn't it? Come on, admit it: You know it's too high as well as I do. You want to buy a household name? I can't think of a reason you should besides, "They keep going up!"

Welcome to the world of the new bull market, in which stocks of all shapes and sizes and sectors break out to unprecedented and unproven levels. Welcome to a world in which the consumer packaged-goods stocks trade like the tech stocks of old, where all that matters is that they have a pulse and seem to be doing OK.

I find moments like these so daunting, because I sit here trying to find stocks that are cheap vs. the fundamentals, and I have to fall back either on stocks of companies I know aren't doing that well -- like Target (TGT) -- or on stocks that might do OK if the world gets better, notably in the tech space. But take a look at how Tech Data (TECD) did Monday, and you will see how hazardous this game is.

Tech Data reported a terrible quarter before the open Monday. Not only did the company miss, but it actually came out and said things could get worse, given that a replacement cycle is going on, from servers to tablets and smartphones. That means the company's own inventory is mismatched with the demand.

I read it and I said, "Oh man, this is terrible -- especially when you consider this tech supermarket has a history of doing it right, not wrong. This change from a high-margin to low margin business is happening so fast that it even smoked Tech Data!"

But the stock opened down and then actually proceeded to rally, and at a certain point it was only down a buck from where it went out Friday. I thought to myself, holy cow, maybe nothing matters!

Then, as the market shook off the Eurasian futures and started to rally, Tech Data fell apart before our eyes and ended up down $4.43, just a hideous outing. Now, here is what's really remarkable about the Tech Data journey. I have no doubt in my mind that, if Tech Data hadn't reported Monday, it would have been up huge. Why not? You could certainly develop a thesis that says, "Look, how long can tech really stay down? Don't I have to buy Tech Data before it has an Avnet (AVT)-style run?"

Come on, you know that's what would have happened.

Yep, it's just so hard to find anything that hasn't already exceeded your price target, maybe even a long time ago. That excepts stocks that are sent down -- and perhaps dramatically so, as with Tech Data -- if we've heard from the company that day.

My take, if you still want to play: Look for stocks that haven't done anything, or have pulled back, despite excellent numbers that the companies merely had the misfortune of reporting during one of those Italian Job days.

I know -- that leaves slim pickings. But what can I say? We are truly in rarefied territory, where the best we can hope for is that our companies don't talk, lest they tell the truth -- like Tech Data did -- that business isn't so hot after all!

Of course, there could be ultimate irony here. As the credential bear Doug Kass says, this market has no memory from day to day. Who knows? Maybe Tech Data is a buying opportunity!

Columnist Conversations

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