Competition's a terrible thing -- at least if you are a shareholder. Sprouts Farmers Market (SFM) has been laid low today by competition. Who isn't in the natural and organic space these days? Whole Foods (WFM) , Walmart (WMT) , Target (TGT) , Kroger (KR) -- who needs another player, one where smaller and nimbler doesn't seem to matter very much? Why do I say that? I don't. The flat comparable-store numbers that Sprouts is sprouting tell you all you need to know.
But Western Digital's (WDC) run? That has to do with a lack of competition. We knew from HP Inc.'s (HPQ) quarter not long ago that prices were tightening for flash memory. In fact, it was an issue that analysts spent a lot of time talking about because it was so unexpected. People didn't seem to realize that supply had tightened. Next thing you know, wham, the new SanDisk (SNDK) division of Western Digital is making good money and the company has to pre-announce to the upside. Believe me, that stock might not be done even up here. That's how much it has been held back.
I marveled last week that neither traders nor investors seemed to think there was a chance there would be legs to this move.
I say go for Micron (MU) as it has a huge flash business that is also benefiting and while it had one up day it wasn't much at all in the scheme of things.
How ruinous is competition? Think about the airlines. They've been bad news forever because many have taken advantage of low fuel costs and added routes and started competing after a long stretch where it seemed like no one wanted to compete with each other. When you saw capacity being added, that was the sign to get out.
Now the airlines are talking about capacity staying sane -- not that much being added, and that declines in revenues per seat miles could be leveling out, something that United Airlines (UAL) CEO Oscar Munoz hinted at when he was on Mad Money last week.
If the airlines don't bring on an abundance of planes, that means lessened competition and, at last, a reason to buy the stocks.
And that's what is happening.
Remember that people want to see higher gross margins, more left over, even if sales aren't spiking. The Western Digital sales aren't moving up, it's the margins that are.
Same could be with the airlines.
It doesn't matter how it gets there.
But it's working.