The Ne'er-Do-Wells Float to the Top

 | May 07, 2013 | 11:12 AM EDT
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Maybe the secret is to do poorly? When you look at the gainers in this market at this point, you have to be stunned by the disconnect between how their businesses are doing and how their stocks are doing. Stunned.

The big gainers tell it all. First, consider Fossil (FOSL). Here's an accessory company that has been stung by an over-reliance on Europe. The stock has been trying to recover ever since a shocking shortfall last year at this time. On Tuesday, it crushed on earnings and the stock is levitating. I don't even think this move is even finished. The expectations got way too low. Now the comparisons to last year will grow easy, and the stock has newfound support, perhaps to take it back to its old highs above $140.

Then there's chronic underperformer Abercrombie & Fitch (ANF). Just simple mentions, like the upgrade at Wells Fargo, send it soaring. All is forgiven for one of the worst retail stocks to own during the period.

Textron (TXT) may have had the biggest estimate miss among all of the defense conglomerates. But now all of the defense stocks are rallying, and it is time for this one to play catch-up. The breakdown on that hideous quarter came at $29, but now the stock has rallied from $24 and change, and anyone who said the shortfall was a buying opportunity has been proven right.

But FedEx (FDX), in its fall from $109 to $91, might have been and could still be a better opportunity. Here is a stock that never has to say it is sorry. It just bounces down and suddenly people totally forget its transgressions and they think, "Hmm, worldwide economy coming back? Let's get some FedEx." Could the stock regain its old heights? All it has to do it keep its mouth shut and perhaps it will.

Is there a more dismal stock than Cliffs Natural (CLF)? This is an iron ore company that has to fight what seems to be an endless supply of iron ore. But it is a down-and-out industrial, and it is a play on a China comeback -- which means it fits the bill for what's working. Don't forget Cliffs did an equity offering much higher. It feels like Freeport-McMoRan (FCX) when that company did the same six years ago and then had a ferocious snapback, although copper is way less abundant than iron is, which is needed just pretty much to make steel, another glutted commodity.

Then there's Joy Global (JOY). Most people have given up on this one, as there's a glut of coal, which means you don't need new excavation equipment. But natural gas has moved up sharply, so coal is back on the burner. As a result, Joy probably has seen its last bad quarter.

Finally, one other loser that's back: Genworth (GNW). It, plus Radian (RDN), are still going strong because of the mortgage settlement between MBIA (MBI) and Bank of America (BAC) and the continued run-off of bad insured mortgages for good ones.

Blackguards and ne'er-do-wells all -- and they are roaring as part of a grab for anything that's left that hasn't yet run up. You know what? I agree with almost every move. As long as these companies don't report and spoil the thesis, their stocks can still go higher. Remember, the market is not about justice, truth and reality. It is about perception and prognostication, and this is the perfect moment to think that things can get better, because there are so few companies out there saying things are getting worse.

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