Sometimes this market just gets way too negative because of some short-sighted extrapolations that make no sense to me -- or, a few days later, to the market either. But they represent great opportunities you need to keep track of. In the last 24 hours, we have seen not one, not two, but three examples of this nonsense occurring.
First is PVH (PVH). This company has a tremendous royalty stream in Calvin Klein and an amazing franchise in Tommy Hilfiger, as well as the dominant position in shirts and ties in this country. I often joke that the Justice Department should be looking into PVH because it owns a third of the shirt market and 50% of the tie market. That is remarkable. Odds are you are wearing something the company makes or some of their merchandise in your closet.
But PVH makes about a third of its sales in Europe, and even though it they are largely from the wealthier European countries, people can't resist betting against it. Recently, those bets grew vociferously when Fossil (FOSL) reported a terrible quarter and gave miserable guidance in part because of Europe.
So let the extrapolations begin. A short position built in PVH of severe proportions.
But when PVH reported last night, it showed no degradation at all in Europe and an amazing acceleration of sales in the U.S. with May being the strongest month of all -- something that was not yet in the numbers. Of course, the stock soared after hours and continues to climb. I think it can go still higher.
Then there's the curious case of Dell (DELL) vs. Hewlett-Packard (HPQ). As I said to Markets Reporter Deborah Borchardt in one of our videos on TheStreet today, I think Hewlett-Packard put in a bottom yesterday that can stand for some time. Why? Because there is now a huge short base, supported by comments by Dell, that the personal computer sector is hurting badly. So people, including yours truly, felt it had to be across the board. But last night, Hewlett-Packard put up some terrific P.C. numbers, especially given that the company itself was about to split off its P.C. division, which should have been a sales killer.
I don't like Hewlett-Packard because I think there are a host of cheaper tech stocks that have better growth. But I sure wouldn't bet against it anymore.
Finally, there NetApp (NTAP), the long-time rival of EMC (EMC) in the enterprise storage space. NTAP offered guidance that led to some of the sharpest earnings per share (EPS) estimate cuts that I have seen in 2012. NTAP made it sound like the sky is falling on the whole big data industry. I think it's the opposite: I think that the sky is falling on NTAP and that EMC is kicking its butt. Like Hewlett-Packard to Dell, PVH to Fossil, I think it's only a matter of time before people realize that NTAP's product line is inferior and its share is falling, perhaps dramatically, to the good managers at EMC.
These are three bogus extrapolations. Two have already been proven and I think the third soon will be. Hence, earlier this afternoon, we picked up some more shares of EMC for the Action Alerts PLUS portfolio to take advantage of the mistake I think the market place is making.