• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing

The Day Ahead: Snatching Messages From the Market

It's wise to understand these early signs now so that winning positions don't turn into losers.
By BRIAN SOZZI Jul 12, 2012 | 08:30 AM EDT
Stocks quotes in this article: ZUMZ, GNC, KO, DNKN, GE

"You won't give, I'll take!" -Joey Zasa, The Godfather: Part III

That infamous line above best captures how I feel about the market this week. Fact is, we're seeing a warranted break in the upward action, and primarily because corporate fundamentals are trumping any macro hope. Hyped Federal Reserve minutes were dead on arrival, and this much I knew when compiling notes Saturday morning. I didn't even mention the release Monday, as it was reflective of a trading setup that should have been detected 17 miles in the distance. There was not going to be a hint of more aggressive easing. There was going to be a realization that more aggressiveness would do next to nothing to alleviate profit margin pitfalls for the rest of 2012.

All these minutes had been poised to do was to disappoint, because they detailed a group of people talking policy style instead of policy action. In addition to all of these bore fests, the real second-quarter earnings season doesn't begin until next week, which is why dour preliminary reports are feeding on this nervous market like mold on six-month-old bread.

So, what the investing world will not give -- that is, news that unleashes new trends or themes -- I will take. Where I take information from is the newfound weakness -- on good volume, no less -- in stocks that had been working well during the market's soft patch. We must identify the leading stocks that are cooling relative to the market, and others that are soft vs. their respective sectors, and it's critical to start on this today. I believe there are messages being told here early on, and it's wise to understand them now so that winning positions don't end up turning into losers.

This is how you "take" from a market.

Zumiez (ZUMZ):

● One of the few winners in specialty apparel in 2012

● Has shaved off 10.2% since its July 5 same-store sales report

● Potential messages being sent: The slip in same-store sales in the final week of June was no fluke. It was an indication of evaporating consumer confidence, thus delaying back-to-school spending, which raises the specter of profit-busting markdowns. Why pay the premium multiple today? Let's send the stock lower and buy it at a cheaper premium to its sector, which is also experiencing a contraction in its price-to-earnings multiple (I see room to $33).

GNC (GNC)

● Basically mirrors Zumiez in relative stock-price outperformance for retail, but has more of a presence overseas.

● The stock spent but a short while trading above its previous all-time high achieved in April.

● Potential messages being sent: This is a predominately a mall-based retailer entering a stretch of tough same-store sales and margin comparisons, and that's the case at most fundamentally outperforming retailers in 2012 -- for example, TJX (TJX) -- as droughts could negatively impact product costs in 2013. In determining whether there's valid fundamental concern on the name and similar stories, I am looking at the April 25 session low of $37.92 as a reference point.

Coca-Cola (KO)

● Has not held up as well as Pepsico (PEP) and Hershey (HSY) in recent sessions.

● Potential messages being sent: Are there broader implications for global packaged goods names after cautious comments from Procter & Gamble (PG) and General Mills (GIS)? I certainly voice concern on pricing power, especially given that Cott (COT) landed strong and valid praise in Barron's this past weekend.

Dunkin Brands (DNKN)

● The stock was a pick of mine back in May, on a webisode of "TheStreet Hits the Street" (which star the amazingly awesome Debra Borchardt and yours truly). I have to say, if you bought on this recommendation, I would have no qualms closing up shop and spying a pre-earnings entry if the stars are aligned.

● Potential messages being sent: Dunkin has enjoyed rising success in sandwiches for lunch, which has led to increased coffee sales. Basically, the company is earning margin from every which angle, for a change. But, if I listen to the market, the message is perhaps the consumer is skipping that splurge and saving for coffee the following day.

General Electric (GE)

● Potential messages being sent: This has quietly been the ironclad industrial name, shaking off concerns on banks, a sluggish global macro climate and assorted warnings from others in the sector. Is that opinion still correct though? The market is questioning it, for sure.

The next group I'm watching for this type of breakdown action is the homebuilding sector. I have not seen enough troublesome selling to state that, for the housing market, the second half will be in stark contrast to the positive first half. Stay tuned.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Sozzi had no positions in the stocks mentioned.

TAGS: Stocks | Investing | U.S. Equity

More from Investing

I Got the 'SOS', So Here's My Take on the Stock's Saga

Timothy Collins
Feb 28, 2021 6:35 PM EST

Let's try to sort out the details of the complicated story of SOS Ltd. -- and why the short reports might be ... selling you short.

Bearish Bets: 2 Nasdaq Stocks You Should Consider Shorting This Week

Bob Lang
Feb 28, 2021 10:30 AM EST

These names are displaying both quantitative and technical deterioration.

Jim Cramer: What History Tells Us About Bond-Rate Scares Like This

Jim Cramer
Feb 27, 2021 2:01 PM EST

We could have some real pain ahead for some stocks. Five different kinds.

What's Next for Bonds, TLT and Interest Rates?

Bruce Kamich
Feb 27, 2021 12:30 PM EST

Thoughts and observations on Treasuries and the direction of interest rates.

Navigating a Market Correction

James "Rev Shark" DePorre
Feb 27, 2021 10:00 AM EST

The most critical factor in long-term market success is the ability to effectively navigate market corrections.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 11:51 AM EST REAL MONEY

    Watch Bob Lang and Doug Kass Discuss Short-Selling!

    Bob Lang and Doug Kass with an engaging and educat...
  • 11:32 AM EST JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Navigating a Market Correction
  • 11:29 AM EST GARY BERMAN

    Where Does the Nasdaq Go From Here?

    Where does the Nasdaq Composite (CCMP) index go fr...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login