Newsflash: When the CEO of a company says it is a tougher environment, he means it. He's not talking idly.
I am thinking about Ford (F) CEO Mark Fields, who told us last week that things are tough in the industry. Today, Dividend Stock Advisor holding Ford reported monthly numbers. And they showed a drop of 3%, when some group of insane, dimwitted people -- called "the consensus" -- thought they would only be down 0.5%. So the stock is being hit -- and is down around 3.5%.
This, to me, is where I find the oblivious nature of investors so unnerving. What do people think is going to happen, here? That numbers are going to miraculously recover after Fields said things aren't so hot on his conference call?
When a CEO says that things are weak, he has a read on how this current quarter is doing, believe me. To think that Fields didn't have July numbers in front of him when he lowered the boom is to think that Ford must use some sort of abacus to keep track of sales.
GM's numbers weren't so hot either. But then, Fields made it clear that the downturn didn't just impact Ford -- which, ironically, has the hottest vehicle in the market, with the F series.
Now it is different in certain industries. For example, we know, because we just heard, that Panera Bread (PNRA) had a terrific quarter. The Action Alerts PLUS portfolio holding has a remodeling going on that has been very helpful to sales.
But last night, Texas Roadhouse (TXRH) told us that business has been softer, calling it a "bit of a slowdown." That freaked people out, because Texas Roadhouse has been among the hottest restaurant chains in the universe of retail. The stock had gone from $37 to $47 in four months' time.
The problem with TXRH? There's a problem with the problem: Management couldn't explain the slowdown -- which is akin to what Target (TGT) said during its challenging April and May, and is never reassuring. I was a bit astonished at this quote from Texas Roadhouse's very able President, Scott Colosi, because it put the sales shortfall in stark perspective: " I think anything about why as an industry -- or anybody specifically -- why sales might be tailing off, I think is speculation. Everything from, is it related to there being a big shooting on TV every other day, it seems like, to the conventions, to the next thing we'll be talking about -- the Olympics coming up in Rio," which start next week.
In other words, they can't figure it out. In that environment, we can't be sure how to forecast anything -- unless we just heard, like with Panera, that things are good. But as with Ford, if the company just said things are good, there's no reason to doubt that things just changed.
Retail and restaurants have become real conundrums, right now. When the best operators aren't sure what the story is, you have to be careful. But when it is good, you use the weakness of the other guy to buy the one that just gave you the buy sign.