Three random events last night remind us how hard it is to pronounce this bull market over, even after six years of this miraculous gallop. Let me run them down: First we have Qualcomm (QCOM) announcing a buyback of astronomical proportions -- $15 billion. Second we have a blow-out quarter from Urban Outfitters (URBN). Third, Skyworks Solutions (SWKS) gets added to the S&P 500. Three pieces of incredibly positive news that are unexpected and pack a wallop.
Why are these so noteworthy? First, if you recall, Qualcomm reported disappointing guidance, with the stock breaking from $72 in the last week of January all the way down to $62. The company had apparently lost Samsung, a major customer, and couldn't possibly make up the losses. So the stock got crushed.
Now here we are, less than seven weeks later, and the stock is above where it was when it cut guidance. The company, it looks like, is doing just fine, announcing that huge buyback and also boosting its dividend by 14%.
What's amazing about this move up is that it isn't being done by an acceleration in earnings. The guidance is still weak. It's being done by sheer cash generation, and while I don't know if the buyback is going to be able to sustain this lift, what matters is that this story morphed from growth to value with some growth, and that's driving it higher.
It's a typical case of back-from-the-dead investing, where you had to buy the weakness to make out like a bandit.
Urban Outfitters is a company that has suffered for years from a combination of a weak flagship store and a confused look and feel for Anthropologie, although Free People was always very strong. Last night Urban put it all together, with Free People reporting 18% comparable stores gains, Anthropologie gaining six and Urban putting up an amazingly impressive 4% increase. At the same time, the company said that January was the strongest month, which means momentum is building.
This change is so incredible because not that long ago Urban had been written off. Now, one could say the company telegraphed this turn of good fortune when it announced a 20 million share buyback two weeks ago. But the stock's flying anyway, and I think it can go a lot higher because Urban's been such a drag and now faces easy comparisons. Meanwhile, as I have been saying, the look of Anthropologie is extraordinary, as it is offering larger and larger home furnishings and really striking a chord with buyers.
Finally, there's Skyworks Solutions. This company reported at a terrible time for tech, and even though it blew the doors off the numbers, it did nothing for about 10 days' time. The company seemed, out of nowhere, to have lost its adherents and it had become a yesteryear story, just another good semi-stock that was being replaced by Avago (AVGO) as the stock to own. People were beginning to short the stock, betting that tech hardware had had its day.
Now here we are, seven weeks later, and the stock, after wallowing in the low $80s, has taken off with the coup de grace to the shorts being delivered last night when the stock was added to the S&P 500 to replace PetSmart (PETM). It's been a totally remarkable run.
All three of these stocks are the kinds of stocks that aren't top of mind because they had either fallen out of favor or were thought to be over-owned. Nobody was looking to them as stocks that could break out here.
But they are.
This kind of action is what keeps happening in this market. Owners of these stocks are just given random acts of kindness. It never seems to stop, regardless of the Fed or Europe or the tussles in Washington or the employment growth or lack of it.
Stocks like Qualcomm, Urban and Skyworks are the heart and soul of this bull market. They're the kind of stocks that you try to trade, and if you give up on them too soon, they cannot make you the money that the patient investors so deservedly make.
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