Newsflash: the world is not ending.
That is the quick takeaway I have after spending two full days meeting executives at this year's ICR Conference in Florida. On Monday, private companies shared their stories with prospective future investors and coverage stock analysts -- the 2015 numbers they were showing, and projections five years out, were certainly encouraging.
The public companies I have been able to catch up with before webcasts, while appreciative of a turbulent stock market, continue to go about their business rather diligently. I can tell you this: they are not watching tick-by-tick stock price movements (if they were, I would be incredibly concerned about the market) and adjusting their full year business plans as a result.
Here are a few things that stick out in the early going.
The Activist Investor
Thanks to big-name agitators such as Carl Icahn, Bill Ackman and Starboard, activist investing has become a constant threat to executives who have historically wanted to beat to their own drum. I still think activist investors are going to have another hell of a year shaking up companies -- you still get the sense that execs want to do things their own way, such as adhering to failed marketing strategies or not buying stock back more aggressively. In a weird way, the public company CEO almost doesn't believe an activist investor will ever show up on their doorstep, because they are doing an amazing job.
Case and point is Macy's (M), which had Starboard use the renewed stock plunge to reignite debate this past weekend on spinning off real estate. I fancy that Macy's will lose the battle in some form with Starboard -- don't expect precisely what Starboard has proposed, but the company should be thinking more creatively about how to maximize the value of its real estate and moving more quickly.
The Fourth Quarter
Overall, Wall Street is bracing for a rather "blah" fourth quarter, highlighted by pressured earnings due to: (1) strong dollar; (2) weakness in emerging markets such as Brazil and China; and (3) tepid wage growth in the U.S. that makes pricing power a tough thing to attain.
However, so far the doom and gloom within businesses focused in the U.S. has not materialized. Restaurants such as Wingstop (WING) and Denny's (DENN) came out on Monday with very solid fourth quarter results. The restaurant category has been pressured in terms of traffic despite tasty promotions and cheaper gas prices. Seeing new and more mature concepts pre-announcing positive results gives support to the Fed's view of an increasingly solid economy that can withstand a slowdown in emerging markets.
Outside of the restaurant arena, Lululemon (LULU) gave upside comp and earnings guidance. The company presents here in the late afternoon on Tuesday. I think the message there is similar to one I have heard from execs in meetings: consumers may have not needed a winter coat this fall, but continue to show a desire to splurge on goods and services that add value to their everyday lives. If you are a yoga freak, you are still purchasing Lululemon clothing, despite the plunge in stocks to kick off 2016.
With stocks under pressure, I think corporate America is poised to unleash the power of its balance sheets in coming weeks (and months if weakness persists) and repurchase shares. In fact, my sense has been that companies ramped up their buyback activity in the fourth quarter as stocks became more turbulent. I suspect that has continued into the first quarter, setting the stage for some fresh, and possibly eye-popping, buyback announcements to go along with fourth quarter earnings reports.