Sell on May 3 and go away? Hey, whatever floats your boat.
Me, I say sell what's run too much on May 3 and keep what's valuable. I know, not that catchy. Not pithy. But you know what? On a day like today, it helps you stay grounded and thinking about what matters if you want to make money in the stock market.
Let's think about the process of buying stocks. Right now we've got some very big trends going the way of the bulls, but they don't go that way every day.
The three big themes? Oil is going higher, not lower, China is bottoming, and the dollar is getting weaker, allowing companies to raise numbers when they project their forecasts.
Today, all three themes are in reverse, so the stock market is giving up some of the gains it made from the themes, with the biggest losers being those stocks that had advanced the most during the prevalence of these major chords.
Have the themes gone away?
I don't think so. We got a number out of China that showed a slight decline in industrial growth. Didn't fit the positive thesis. I think it's an outlier. There's been too much positive data for me to jump ship on that one.
Oil? It got clubbed today, down a buck forty, and that's because OPEC ever so slightly increased production this past month. I say, no kidding, Iran is back on line and pumping as much as it can.
I am surprised OPEC isn't producing far more oil. I make that statement because right now demand in China and the U.S. is picking up while supply is dropping more quickly than most think. The bankruptcy filings are telling enough. Two big producers with more than $5 billion in debt just filed last week. RBN reports that there now have been 65 exploration and production bankruptcies in 18 months. While bankruptcy doesn't necessarily mean that oil won't get pumped, it does cut back supply. The cutbacks and the increased demand make me think that the buck thirty-five decline in crude isn't the beginning of something big. It's an opportunity to buy.
Finally, there's the dollar. Now it is true that the dollar opened weaker and then got stronger throughout the day. But again, I am not concerned that we are at the beginning of a new strong dollar trend. We aren't seeing a clamoring for rate hikes from the Fed. Until we do, I don't expect the dollar to spike.
I think it's a lull, and in the lull I like to take the temperature of the market and look for some bargains.
The first thing I see? The continuation of the rally in retail. Last week we heard about how Amazon (AMZN) was eviscerating all retail.
This week retail started bouncing back. We've gotten two upgrades of the very controversial Costco (COST). It is controversial because it had a close relationship with American Express (AXP) and that relationship has ended with new users going toward Visa (V), which like Costco is part of the Action Alerts PLUS portfolio.
I listen to a lot of conference calls looking to learn not just about the company on the call but also about other companies that get mentioned on the call. The executives on the American Express call hammered Costco. Why not? American Express wouldn't pay up to maintain the relationship -- something that Charlie Munger, the Berkshire Hathaway (BRK.B) exec who is on the board of Costco, said was just nuts because Costco is a powerhouse. I thought it was pretty darned telling given that Berkshire owns more than 15% of American Express.
But Costco is not the only retailer that ran today. The stock of CVS (CVS) soared even as the quarter it put up seemed pretty humdrum. I like that. It says that the stock was reflecting a shortfall and when CVS didn't deliver one, the stock zoomed higher. I like the company very much and was surprised that the stock had just been biding time; it's literally unchanged year over year. Today felt break-outish; I like that.
Or how about Clorox (CLX)? I have heard over and over again that this consumer packaged goods group has run its course now that the Fed is raising rates and the valuations have gotten out of control. Then Clorox today reported a much-better-than-expected quarter with some really amazing volume growth, and I liked the growth of all the different divisions. As someone who was about to subscribe to the theory that the group has had its big move and the action is with the industrials, I was struck by how much the stock advanced. In fact, it hit an all- time high. That's simply not supposed to be in the script, and it tells me that if companies in this industry beat numbers there is no lid on the stocks.
Same with Pfizer (PFE). I haven't been that enamored of this group because the best of the big-cap pharmas, Bristol-Myers Squibb (BMY), was quick to give up its gain off a better-than-expected quarter. Pfizer, however, put up a gigantic number, unexpectedly strong, as opposed to the perpetually positive BMY, and the gain seems to have staying power.
And then we have some rallies in three stocks that haven't been able to get out of their own way of late. First is Valeant (VRX). The big champion of Valeant, Bill Ackman, came on the "Halftime Report" yesterday and gave Scott Wapner one of those watertight cases to buy the stock of the beleaguered company. Given that the company had just been called a sewer by Charlie Munger that same day, the resurrection is duly noted and the back-from-the-dead jump today is quite extraordinary.
I took a lot of trashing in social media when I said that the stock of Chipotle (CMG) wouldn't be destroyed by its first quarterly loss. It was one of those moments I have become so used to whenever I stick my neck out. If the stock doesn't immediately react positively I am branded as a clown. Look, call me Krusty, but that stock is pretty much unchanged from the so-called end-of-days Chipotle quarter. I reiterate that I believe the stock will be higher at this point next year than it is now.
Finally, there's Apple (AAPL), which also is part of the Action Alerts PLUS portfolio. The stock has been down for eight straight days. That's a very long skein for the largest capitalized company on earth. But last night Tim Cook came on "Mad Money" and made a case that perhaps the service revenue stream isn't being valued correctly and that it will grow regardless of whether the units slow down this quarter. He made a case for the company's stock to be bought right here because of that undervaluation. We know his company is opportunistically buying stock and that it's the mother of all buybacks.
I know many bears who heard Cook simply doubled down on their bearishness after the interview, more of which will be shown later tonight. They heard that the service revenue stream is irrelevant and the best days are really behind the company and that Cook is desperate.
Oh please. He's no more desperate than any other CEO who just booked ten billion in profit the last quarter, meaning not desperate at all.
Now I don't think past performance for any of these three stocks is a reliable indicator of the future. Valeant is up big, but it could be ephemeral given its monster run from the bottom just yesterday. Chipotle has got to give shareholders and potential shareholders some sense that May might be better than April, and May just began.
You know that there are some eager analysts anxious to jump ship on Apple and have just been waiting for an up day. There are way too many bulls among the analysts for this stock not to catch some downgrades.
Still, what matters is that the major trends I think are very much in place, and even when they aren't you still get some pretty darned good moves in a whole different set of stocks that you least expected to rally. That's bullish, not bearish, and it means selling on some day in May isn't a strategy -- it's just a real stupid truncated limerick.