The Daily Dose: Analysis Behind Crazy Stats

 | May 12, 2014 | 9:37 AM EDT  | Comments
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Stock quotes in this article:

twtr

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FB

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nke

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vfc

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rl

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wmt

The weekends usually bring an overwhelming amount of statistics for investors to ponder. It's as if all the people in the financial services industry trip over themselves to offer that amazing key stat that could go viral. Should the buzzy stat be accompanied by a colorful chart, the chance to be viral rock star appreciates considerably.

As an investor, you should always remember what a stat or chart represents: a figure or graphic likely making it easier to understand a past occurrence in the market or economy. A stat that seemed relevant on Monday is completely useless by Wednesday, in most cases that I have studied through the years.

That said, I do believe there are some new stats floating around that deserve careful attention.

Stat No. 1: Stocks that have the highest ratings from analysts have lost 2.4% this year, while the least favored have gained 3.5%.

Why it matters: You could be missing out on important rotations and not asking the correct questions during the investment selection process.

Details: When stumbling across this stat, I thought that it suggested that a flight to garbage has been transpiring, or a rotation into companies that have subpar fundamentals. But amid further reflection, and considering the rotation into large-caps that is grabbing headlines, it may be a signal of a healthier market that is benefiting from spreading growth acceleration in sectors of the economy.

Stock analysts still favor hyped tech stocks, because they don't want to disregard the factors that drove the hype and the stock price in the first place (see Facebook (FB) and Twitter (TWTR)), and they often neglect new information on covered names. Hence, new opportunities in a specific sector are not identified. I never make these mistakes (wink wink).

Stat No. 2: Shares of Twitter are down 57% from their December high.

Why it matters: Takeover talk could begin to surface.

Details: I believe that takeover chatter on Twitter will intensify in the coming weeks, because the company lacks a short-term positive catalyst to stem the stock's decline. If this chatter does gain steam, it could lead to a floor being placed under the brutalized Nasdaq. Watch how Twitter trades around the approaching investment conferences, as that is where the rumors will start to appear.

Stat No. 3: China is poised to open a crazy 2,500 new malls in the next three years.

Why it matters: This could initially benefit U.S. wholesalers such as Nike (NKE), VF Corp. (VFC) and Ralph Lauren (RL).

Details: Personally, I believe a good deal of these new malls will go bust before the year 2020 and hurt wholesalers and debt-holders. However, in the near term, there is a nearing secret catalyst in play that nobody is discussing or positioned to profit from.

Wal-Mart (WMT) is scheduled to present earnings on May 15. There is no reason to expect Wal-Mart to replicate what other retailers did last week in raising their earnings outlooks. At best, we are looking for a reiteration of the disappointing earnings-per-share range that the company conveyed months ago. On the basis of my checks, the quarter was challenging, and another earnings warning could lead to a material amount of air being let out of this blue-and-yellow stock balloon.

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