Best Buy and Macy's Say It All

 | Aug 27, 2014 | 2:21 PM EDT
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Best Buy (BBY) and Macy's (M) say it all. Both missed. Both guided down. Both were pretty shocking, Macy's because it has been amazingly consistent and Best Buy because, honestly, the commentary could not have been more negative.

Macy's got hammered and it turned out to be a fabulous buying opportunity. Why? Try as I have, I don't know. Maybe it is just a belief that things are getting better. Maybe because people believe that the lower gasoline goes, the better Macy's does. Perhaps it was an aberration? Maybe they saw how J.C. Penney (JCP) came back but not so much that it made a difference? Maybe it was a recognition that there has been less price-cutting in the group? We don't even know. No one has the answer -- but I have heard a lot of conjecture.

The simple fact is that there is a huge bid under retail and Macy's is retail.

Best Buy was far worse than Macy's was. The commentary was simply awful. When I read it, I said to myself, "They are telling you to sell this stock because they are going to get their heads beaten in by Amazon (AMZN)."

But, like Macy's, it didn't matter. Now the stock is going higher. You can say, "Well, wait, like Macy's, we didn't get any real downgrades." Still, though, it's working, and that's what matters.

So what is up with all of this? OK, here's what I see is happening. If you look at the good performers in the group -- TJX (TJX), Ross Stores (ROST) and Urban Outfitters (URBN) -- and you notice that Target (TGT) didn't go down on that horrendous quarter, you have to conclude two things:

  1. The back to school season is going much better than you think, and
  2. People are betting that the holiday season is going to be very strong.

In Best Buy's case, it is betting that the holiday season is going to be better because of gaming, new cellphones and new GoPro (GPRO) devices, all of which are in the Best Buy sweet spot.

Like the other day, when I opined that you didn't have to worry about the bank stocks' rally because they don't report for a long time, you can speculate that holiday season can take these retailers far -- provided that you don't get any real bad back-to-school commentary. I think you have to believe that you would have already if that were the case.

Hence, why the move has legs. Hence, why you have to buy stocks of companies that didn't report good numbers, betting that the future is brighter. I get it. I wish it weren't like that, but I get it and I think that's the real reason why the SPDR S&P Retail ETF (XRT) seems to have a bid underneath it, no matter what's said or done.

Random Musings:

  • The suspicious buying in Kellogg (K) is so persistent, who doesn't' want to go long it?
  • The selling in SunTrust (STI) is ridiculous, but it keeps happening.
  • I think the fact that SeaDrill (SDRL) isn't down badly on that terrible number means two things: one, some analysts will still downgrade it tomorrow but, two, because they are not buying more ships, we are putting in a bottom.
  • I hear Doug Kass on social-media stocks. They will be doggie as long as there is a threat of monster IPOs ahead.
  • But I also know the earnings-per-share power of Facebook (FB), Google (GOOGL) and even Twitter (TWTR) beckons and I wouldn't sell Yelp (YELP) no matter what.
  • GoPro and Mobileye (MBLY) are the two new specs that are loved and will stay that way for a long time.



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