The Daily Dose: Deal in Facts

 | Aug 26, 2014 | 7:00 AM EDT
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An apparent expert on the market said as the S&P 500 crossed the 2,000 level: "It's important that we made it. It's a milestone."

According to Bloomberg, the S&P 500 has risen about 100 points since its low during trading on Aug. 7 and has risen on nine of 12 days to erase the 3.9% drop that began on July 24. Pretty mouthwatering data points and expert commentary, huh?  

I caution investors not to fall susceptible to the loads of nonsense that is going to come down the pipeline from stock forecasters in the days ahead. If my experience has taught me anything, it's when the market reaches certain milestones, good or bad, investment bank analysts and economists burn the midnight oil to put together notes that support their opinions on the extreme of the particular moment.

What you have to keep in mind right now is that milestones in the market are ridiculous, something made up to generate headlines and sell newspapers. Today, big round numbers lead to click-throughs on social media that are akin to getting high on cocaine for digital ad sellers. 

Here is a dose of reality.

A company's valuations still take precedence over round market numbers. Given all of this tax inversion stuff (Burger King (BKW) shares popped 21% on the Tim Hortons (THI) news as the market priced in tax relief, among sales and supply chain synergies) and ongoing use of technology to drive business efficiencies, valuations of best-in-class companies remain somewhat compelling. I just finished up an interview with a very prominent restaurant CEO and what the company is working on in terms of technology immediately painted a picture of stronger-than-epected future earnings power.

Why Best Buy May Crush All Naysayers

I wrote this piece the day before Best Buy's (BBY) earnings. I am willing to learn from my analytical mistakes should Best Buy miss on earnings, causing the stock to crash. But my firm upgraded Best Buy before earnings and I think it's important for you to understand the thought process.

Best Buy has been left for dead by many on Wall Street, a retailing relic not equipped to survive against an online world of price matching led by Amazon (AMZN) and Wal-Mart (WMT). Even I have been bearish on the company in 2014 after riding the stock as a top pick in 2013. But there was good reason going into the second-quarter earnings release to believe the electronics retailer delivered surprisingly decent figures and holiday sales guidance. From new ship merchandise from store capabilities to robust appliance sales due to the housing recovery, Best Buy has some interesting business drivers that Wall Street may have overlooked in its modeling. 

Here are a few things I saw beforehand.

Best Buy now has the capability to ship merchandise from all 1,493 of its domestic stores to online shoppers. That helps to reduce the possibility of lost sales from out-of-stock messages and limits the worse possible markdown rate on an unsold good.  The concept of integrated retailing is really taking hold for many companies and the second-quarter went a long way in supporting that notion.

As we learned from Home Depot (HD), Lowe's (LOW) and Whirlpool (WHR) appliance sales were strong in the second quarter. Appliance sales make up about 7% of Best Buy's annual sales.

And finally, people appear to be buying big screen TVs, something detailed by Wal-Mart, Target (TGT) and recent industry data. LCD shipments for TVs with screens of more than 50 inches rose an impressive 69% in July, according to Bloomberg data.

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