The Daily Dose: After the Washout

 | Dec 12, 2013 | 9:00 AM EST
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Whoosh -- and there went the equity market on Wednesday! I told you earlier in the month to begin lightening up on that risk that your broker has shoved into the portfolio this year. You didn't listen, and I'm not sure why.

Now you must be subjected to the re-emergence of the oddly quiet strategists saying they expected a pullback in the market due to "rising risk factors." Huh?

I have no patience for these financial services games wherever they are played, and I humbly advise you to beware of the flying dung. Let's make some money by avoiding the end-of-the-year blowups and positioning correctly into January. (How is that Caterpillar (CAT) working after Joy Global's (JOY) miss? Not well. Timing matters when trying to get positioned in laggards into a new year.)

Wal-Mart Will Warn

I know you are watching Wal-Mart (WMT) and that you totally see the LinkedIn profile views. Since you are spying on this highly credible, well-sourced stock analyst, chew on this statement: I expect you to issue an earnings warning to the masses in mid-February. Considering I am a nice fella, I have devoted this overview to be forwarded to the email box of incoming CEO Doug McMillon.


New CEO at the helm. Many say he will follow the status quo. Sort of makes sense, seeing as the Walton family is still in the mix and a lame former CEO (Lee Scott) is on the board. I say if the new CEO wants to put Wal-Mart on the path to survive (yes, survive) 15 years into the future, I reckon he best do the following:

  1. Close 300 or so underperforming U.S. stores that are producing -7% same-store sales. You are unlikely to do this, so shutter 50 stores to signal to the Street that this is an operation that will be managed more tightly.
  2. Drastically slow down massive new supercenter rollouts and focus more on opening metro grocery stores.
  3. Fix employee relations, and that starts with paying people a livable wage. If Wal-Mart does not bend to a world with greater access to information on how their fellow Americans are being treated, it will hurt sales and internal operations (as in employees continue to fail at stocking food shelves). Hey, this is sample of your stores...

In advance of this warning that will surprise the part of the Street that is not receiving my company's research, you the investor should be considering:

  • The suppliers in general merchandise that could experience order cutbacks (notice I didn't say food -- Wal-Mart can't keep that stuff in stock).
  • The knock-on effects to Target (TGT), Costco (COST) and others from Wal-Mart taking its operating tactics to the next level in order to correct its stores.

Around the Horn

  • Consumer staples are securing bids. This is sensible, as they are under-owned in this still-juiced market. Names in particular: Kimberly-Clark (KMB), Pepsi (PEP), Coca-Cola (KO), Hershey (HSY).
  • The next buying opportunity is likely on Dec. 19, after a Fed meeting that did not deliver a tapering and which continued to have largely dovish commentary by the chairman. Remember, the market is currently pricing in worst possible cases from the Fed meeting that, even if they were to go down, would be priced in by then.

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