This market is filled with cases of seller's remorse. It's chock-full of stocks that got clobbered when they reported earnings, and then roared higher as people seemed to forget the bad news, overlook it or just said, you know what, it wasn't as bad as I thought.
We see them every day. I often marvel at how short-term people are when it comes to earnings and how longer-term they should be if the story's really unchanged or actually better.
Let me go over some real seller's remorse stories, some from before earnings and some from after, so you know what I am talking about.
Recently, we had four CEOs come on Mad Money and they all fit the bill of what I am talking about.
First up was Tom Falk, CEO of Kimberly Clark (KMB). His company had just reported earnings that, if you looked under the hood, showed tremendous growth and a lot of great cost reduction. No matter, the company said it saw earnings for 2016 from $5.95 to $6.15 a share, and the Street was looking for $6.14, and a bunch of stories immediately appeared saying, "Kimberly Clark misses Street estimates."
I don't know. I did what I always do before I interview a CEO for Mad Money. I read the predictive notes, what Wall Street analysts were looking for, I read the press release, I listened to the conference call and then I read analysts' comments about the quarter.
It seems that while Kimberly had a lot of good things to say, it got hurt by currency like everyone else and there were some one-time timing issues that obscured what amounted to a breathtakingly good quarter.
I do my best, by the way, not to look at the stock, because I have become convinced that the holders of so many stocks are so short-term and do so little homework that to take your cue from a short-term movement in stock -- not a long-term -- is just stupid as all get out. You just aren't going to get it right.
So I ignored that the stock fell from $127 to $122 off the quarter until the interview began. Then I just asked Falk point-blank if the decline made any sense to him at all because it sure didn't make sense to me given how well the company is doing. He promptly agreed and we went over how not only was the quarter not a "miss," but there were many line items that were much better than expected.
It seemed so obvious if you had done the homework.
Sure enough, Kimberly did the big pirouette and soared and has now gone from $122 to $132, hitting an all-time high. The sellers were just plain wrong.
Clorox (CLX)? Similar situation. I loved the quarter because it showed some incredible margin improvement, in part because energy costs were way down because of the collapse in oil. Burt's Bees, the natural and organic line of goods, was spectacular. Kingsford's terrific. The new splashless bleach numbers were off the charts.
What happens? The stock gets obliterated, falling from $131 to $124. When I saw CEO Benno Dorer soon after, I asked him the exact same thing. What's the deal? How could your stock have gotten so clobbered? He didn't know. He has beaten everything he was asked to do. I puzzled over a line item that concerned me, the mild disappointment from Brita Filters. He quickly explained that the company was about to launch a big national campaign for Brita, starring basketball genius Steph Curry. In light of Dorer's comments, I promptly called the decline ridiculous. It was. Memo to the idiots who sold it: The stock's now gone from $124 to $130, almost back to where it was when it reported. I am confident it can take out that high.
The other day Brent Saunders, CEO of Allergan (AGN), came on after his company reported what I think was by far the best report of any pharmaceutical company in 2016. Most of the drug lines had accelerated sales growth. The company's approval rates were off the charts. Plus, its merger with Pfizer (PFE), while under attack by House Democrats for taking advantage of a legal loophole in the tax law to allow the company to pay lower taxes in a foreign jurisdiction, was on track and ready to close in the second half of the year.
I asked him, how he could explain how hard the stock's been hit of late, including the two bucks down after it reported. He said he was "baffled." He had no explanation for the weakness whatsoever.
I asked if it could be because a key part of the transaction, a sale of his generic drug business to Teva (TEVA) for $40 billion, might be off track. Nope, it will close soon. I wondered if perhaps there might be something with pricing, something political. Nope, nothing's changed. I threw up my hands and stopped trying to shoehorn why people sell and proclaimed my bafflement, too!
We were right to be baffled. The stock's up a quick $10 since the report.
Then there's the bizarre saga of Salesforce.com (CRM). Three weeks ago, we visited with CEO Marc Benioff in San Francisco. The stock had just fallen from $67 to the mid-$50s after having already come down from $81 in December.
While Benioff couldn't answer directly how the quarter was, given that he was in what's known as "quiet period" where you can't reveal the numbers of a quarter, he did go out of his way to say it was a fabulous time for Salesforce and that the whole group of high-growth stocks has been going down but that business was booming. He talked about customer enthusiasm for a suite of new products and how CEOs had been praising it all over the place and replacing their current systems with it or going all Salesforce, like consultant giant Accenture (ACN), a marquee client if you could ever have one. The result? The stock immediately fell another 8%.
The whole thing was insane.
Insult to injury, earlier in the week a brokerage firm said Benioff would be cautious on his call and the gross margins could be under pressure not to mention issues about acquisition integration and a strong dollar.
Last night, Salesforce reported the best tech quarter of 2016. The company gave you remarkable 27% revenue growth, astounding for a company with $8 billion in sales, including a 38% rise in operating cash flow to $460 million -- take that, you who think the company actually makes no money. It landed not one but two nine-figure contracts, again unheard of not just in Silicon Valley, but anywhere.
There was no mention of integration issues. The gross margins were off the charts. The strong dollar? It didn't even come up. But what did have to come up? How about analysts' numbers for the rest of 2016? And they were taken up gigantically.
It was insane.
There were a ton of others just like these. Wal-Mart (WMT) allegedly blew it when the company reported and the stock got hammered. But after further review, the reasons for the decline seemed a little too pat and the explanations pretty darned thorough. It's up almost four points since the selloff.
Same thing with Lockheed Martin (LMT). The stock had been in a huge downturn when it reported and then went still lower. Why did they sell? Who knows? It's now up 14 straight points from when they gave up on it. (Allergan and Lockheed Martin are part of TheStreet's Action Alerts PLUS portfolio.)
To me, these are all examples of snap judgments, fear and panic. They are the enemies of capital, the destroyers of your portfolio. Let these stocks be a reminder that your first judgment may not be a judgment of all, just the siren of worry blurring your decision-making and keeping you from making money.