Think Globally, Buy Locally

 | Sep 03, 2014 | 11:33 AM EDT
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Delta Air Lines (DAL) demonstrates what I most fear about this market. This morning, the terrifically run airline announced very strong domestic numbers. But in the same breath, the company shaded down its passenger revenue per average seat mile, the key metric, because of the, and I quote, "impact of events in Russia, the Middle East and Africa."

There it is. You've got Ukraine, including the downing of MH-17, and you've got Africa with Ebola and you have wars all over the place in the Middle East. Now, the whole decline only knocked off a percent off of what we expected in revenue growth, but when a 3% figure estimate goes down to 2% in a situation where everyone expected perfection, you are going to have a hammered stock. And that's just what we are getting with Delta, which is down almost 5% today.

Now, this is crucial: Delta is not known as a company that does a ton of business in any of these countries. In fact, many people think it is a domestic carrier with some business overseas. But as someone who recently flew Delta to Prague, I know that this company's ancillary markets have to have taken a hit.

This is the kind of news that I fear most. For example, we heard some terrific auto numbers this morning. The numbers were so strong that we are talking about selling more than 17 million cars in this country. That's just an out-and-out boom. But other than the perennially hot Tesla (TSLA), the U.S. is only part of the puzzle. Buying General Motors (GM) or Ford (F) off of just the U.S. is something that simply hasn't worked for ages and won't work now.

Now, for a moment, contrast these with CVS (CVS). The company just gave up $2 billion in revenues by giving cigarette butts the boot in landmark decision that allows the 7,700-drug store chain to change its name from CVS Caremark to CVS Health. Here's a company that is willing to surrender tobacco revenue to other companies, including competitors Walgreen (WAG) and Rite Aid (RAD), beginning today and what does the stock do? It hits its 52-week high.

How can that be? Because CVS is a uniquely domestic chain that isn't about to have a shade down because of Ebola or war in the Middle East or Ukrainian tensions. How local is CVS? When I told the incredibly good CEO, Larry Merlo, that I was bummed that the roof had fallen in at my local CVS, he said, without skipping a beat, that it certainly it was a tough break for his Summit, N.J. customers, but the company did manage to bring in a mobile van for prescriptions. So I didn't have a problem filling any of my prescriptions. When this guy talks Kiev, he's ordering Chicken Kiev -- that's what I am looking for.

Now it is true that we are hearing rumblings of ceasefire talk between Ukraine and Russia and that will be terrific news for companies that have so much business in Europe. But there's a gulf here between when Europe could come back online and when companies report their third-quarter numbers.

We got this Delta news because it had an earnings presentation. Judging by the rocking of this very good stock, I think the move is a prelude to weakness in other not-as-strong companies that have more international business. The bridge between quarterly announcements might be a flimsy one, indeed.

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