It has been a fun week-plus working with TheStreet's flagship site, morphing into some of multimedia beast that does videos from graveyards and snaps photos of dangerous machines at Home Depot (HD) and Lowe's (LOW).
One byproduct of all this work is that I now talk in bullet points, even doing do at a dinner with my friend. Not normal, but upon deeper reflection, it makes sense. Cut right to the point, remove all useless filler.
Overall Market View
- Don't be a hero. The economy is sending you negative signs, the latest being consumer confidence. The concerning aspect has to do with expectations. We as consumers buy stuff on expectations. If you were an intelligent investor, you would pay attention to them and seek to profit accordingly.
- Now is the time to drill into the heart of companies. Don't try to pick the next hot social media stock or the next Tesla Motors (TSLA) after a Consumer Reports study or an investment-bank upgrade. Lower-quality companies are driving this most recent stock rally, and that means we are reaching a period of investor recklessness. In a period of investor recklessness, you the intelligent investor should be very keen on finding companies that could shock the market over the next three quarters.
Completely Random Stock Picks
- Dick's Sporting Goods (DKS): My firm, Belus Capital Advisors, upgraded this stock on Tuesday, sending the shares up 3% on the day. We see three catalysts: wearable-device pop-up shops, an apparel battle between Nike (NKE) and Under Armour (UA), and more productive sales floors.
- Sears Holdings (SHLD): This is a call for experienced investors only. We continue to rate the stock a Sell. The catalyst: more shockingly bad results in 2014 that call into question the survival of the company.
- Owens Corning (OC): I liked the comments from Home Depot's management on Tuesday on its earnings call, saying that the company's core business is solid. This reaffirms my opinion that we could get a springtime boom for remodeling-related products. Owens Corning is coming off a good quarter in its key insulation category, and I have noticed more floor space for its products at home-improvement retailers.
The Bottom Line on Target
Here is something you may not know but should know: Target (TGT) is failing in Canada. The company entered Canada with all sorts of bravado that it could do in Canada what it has done in the U.S.
Boy, has Target been wrong, incurring a whopping $600 million in operating losses in 2013. Target continues to sell the hope to investors on its Canadian potential by saying it is fixing problems, such as persistent out-of-stocks and poor price perception. However, my sources on the ground in Canada are telling me, and showing me digitally, a completely different story.
Here is some new intelligence:
- Target remains badly out of stock in traffic-driving food, consumables, and basic apparel. Employees continue to be slow in taking merchandise from the stockroom to the sales floor.
- Target is failing at imposing its will on consumers. Canadian consumers continue to view Target as an expensive and confusing place to shop.
- Wal-Mart (WMT) has gotten even sharper with its merchandise prices, stomping on the neck of Target while it tries to right its own sinking shop.