Yesterday, while freezing at the Phillies home opener, it occurred to me that the term "bizzaro world" does not just apply to the equity markets, but also to baseball. For starters, baseball is not supposed to be played with temperatures in the 40s, as it was yesterday. Then, when Phillies rookie manager Gabe Kapler, starting just his sixth game at the helm, was loudly booed not once (his introduction at the start of the game), but twice (when he yanked Phils starter Nick Pivetta with 2 outs in the sixth inning), I knew I was in the Twilight zone. Maybe it's because Kapler is in a different world himself; a sushi guy in a cheesesteak city (I'll still take the latter).
Meanwhile, as I sat watching that game, bizarro markets were in full force. The ever volatile S&P 500 was up about 0.7% on the day, following another 4-day run of volatility, where the Index closed up or down more than 1%. For those not yet tired of me blathering on about my favorite measure of volatility, that's happened 8 of the past 10 trading days, and 26 of the past 48.
Within small cap specialty retail bizarre world, investors continue to reward some of the very same names that were all but left for dead several months ago. Hibbett Sports HIBB, up 23% over the past two weeks, had started to lose some steam, but is inching closer towards a 52-week high. Fourth-quarter revenue surprised to the upside ($266.7 million versus $262.5 million consensus), and earnings per share (44 cents) beat estimates by a penny. During the quarter, the company repurchased another 611K shares, for a total of 2.84 million for the year. Over the past five years, the company has reduced shares outstanding by more than 27%. Bizarre that this is the same company that was pushed below $10 back in August during the great retail purge, but that's the beauty of market inefficiencies.
Cato Corp CATO, which has put up some of the most dreadful same-store sales numbers I've seen, also continues to rally. Shares are up more than 40% over the past month. In context, that move, from the mid-$11 range to $16+ is of little comfort to those who were in at $40 or more just a few years ago. However, the entry point in distressed names for value investors is what drives potential returns, and in the $11 range, with a boatload of cash and short-term investments, this one, warts and all, was too compelling to ignore.
Big 5 Sporting Goods BGFV, also continues to move higher, up more than 20% over the past month, and yielding 8.9%; and no, I did not take a position with the belief that the dividend will be sustained. But then again, this is bizarre world.
Finally, consider Fossil FOSL, which more than doubled over the course of a week back in February to about $17, after a much better than expected earnings release perhaps fueled by some takeover speculation, then gave back 5 points to the mid-$11 range, appears to be on the upswing again. Shares were up 4% yesterday, to the mid-$14 range, and are up 87% year to date.
What's most bizarre is that this investor now has several positions in dinosaur specialty retailers; but the trades have so far worked well. I do not kid myself that these will be my more typical long-term holdings.