The Daily Dose: Recovering from Brutality

 | Apr 07, 2014 | 10:00 AM EDT  | Comments
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Stock quotes in this article:

ko

,

pep

,

hsy

,

cost

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wmt

,

bby

,

aa

,

mu

Pretty brutal Friday, huh? Forget the momentum-name bloodbath. When I see a Micron (MU) initially pop in response to earnings by 2% and then finish down 6% it's disturbing. This is the type of action to be on the lookout for when Alcoa (AA) reports earnings this week, it could be a big red flag on the markets in the near-term.

Another thing to be watching for is the rotation into value names from growth; this rotation is being used as a defense for the bull market being just fine. Compose a list of five value names and start tracking their daily relative price action and relative strength. Weakness could be an indication that money is headed to the sidelines in front of the April 29-30 Federal Reserve meeting. Three examples of value names I am using: Coca-Cola (KO), Pepsi (PEP), and Hershey (HSY).

Value
Yahoo! Finance

The Reality Investing Era

It's next to impossible to absorb every piece of economic data that is relayed. You may be able to rifle off headline figures from five reports in a busy week, maybe even recite the market's reaction. I encourage you to take a step back, however, and ask yourself this key question: "am I really digging deep into the data and then scrutinizing it before changing the portfolio around?" The answer is likely no.

Scroll down to the March employment report and you see those blue hyperlinks to more data. Did you click on them on Friday, Saturday, or Sunday? My point exactly.

I strongly encourage you if you're are not a proud owner of Google Glass, to carry a small reporter's notepad in a purse, murse (man purse), or jacket pocket as to jot down observations while out in the real world (where investments live and breathe!).

Does that package of bloody Purdue chicken at Costco (COST) "feel" more expensive compared to two weeks ago, then scribble that sense down and investigate it further at home. It may be impacting at least 10 investments other than Costco's same-store sales and gross margins (note: Costco's profit margins usually hurt in periods of inflation). Observe a new Hershey chocolate product on the shelves for Easter, make a note, then read on what the consumer staple is up to these days.

Target Observations

I have been spending an abnormal time in Target people watching, trying to decipher if one,  the consumer remains in last-minute buying mode for seasonal products; and two if the consumer still has a lack of trust in the Target brand following the credit card breach from the holidays.

Some points:

  1. Peak weekend traffic (notably Sunday evening) is still not typical peak weekend traffic for Target. In other words, it's soft.
  2. Cosmetics are consistently sold out, Target is a share gainer here from the likes of Walgreen, Rite-Aid, and CVS.
  3. Target has seemingly given up on trying to push its 5% Rewards credit program at checkout; there is only a single pamphlet taped at eye level by the cashier.
  4. Target's stores are frighteningly ill-equipped to properly showcase new advances in technology. I believe Target must re-think the layout in this part of its stores, or it will lead to Wal-Mart (WMT) and Best Buy (BBY) winning big during the important holiday season.

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