It's maddeningly inconsistent out there. We have good days followed by bad days. We have stocks that go up on individual performances and then go down on aggregate news and other stocks that rally on good events, but then give up those gains when they aren't sustainable.
This makes it plain treacherous out there every day.
Let me give you some examples, so you know exactly what I am talking about.
Last Thursday night Twitter TWTR broadcast an incredibly exciting contest between the New York Jets and the Buffalo Bills and the followers of the stock were bursting with glee. If you went to my mentions column, I was bombarded with people who simply could not stop telling me this was the biggest event since the Super Bowl. There were people who were saying that my tempered enthusiasm was so misplaced -- and I actually enjoyed the game -- and that Twitter was now headed to the stratosphere.
Sure enough, the stock jumped almost a full dollar to a little north of $19. But then we got the numbers for the actual show and they were downright puny. On an apple-to-apples basis, 243,000 people watched the game on Twitter, while 15 million caught it on CBS and the NFL Network. It was, in a word, disappointing and even though the diehards don't want to hear it, the stock was immediately hammered pretty much to where it was before the game. So, the excitement -- and it was exciting -- did not turn out to be the needle-mover that so many expected. I continue to think that Twitter is an undervalued asset vs. what it can do for another company, but it is overvalued on its current configuration.
Or how about Home Depot (HD) ? If you asked me which company had the single-best report of all the major big-box retailers, the call would be an easy one: Home Depot. Monster same-store sales, raised guidance, tremendous commentary both short and long term, a multi-year forecast of positive data points in elevated earnings.
But we have been hearing anecdotally about a slowdown in spending, first from the aggregate retail sales for the month of August, after Home Deport reported, with sales falling 0.3% from the month before. Pretty shattering. Then we got a housing starts decline today of a fairly large proportion, down 5%, confirming what was thought to be a downbeat period after Home Depot's report.
The result? The best-performing retailer by the numbers is one of the worst performers by the stock, having fallen to $126 from $138. Who knows what would have happened if it had reported a weaker number.
Or how about the inconsistencies with in groups, a highly unusual development. I would say that the two best-run homebuilders in the country are Lennar (LEN) and Toll (TOL) . Recently Toll's CEO Doug Yearly came on "Mad Money" and told a terrific story of expanding gross margins and improving sales. He even basically raised his forecast on the show.
But today Lennar reported and gave you an ever-so-slight decline in gross margins. The result? Lennar's stock drops almost 4%.
How about last Friday when Greg Hayes, the CEO of United Technologies (UTX) spoke and basically reiterated guidance. At the same time, he talked about production problems in making the new Geared Turbofan fuel efficient energy aircraft engine. He delineated how hard the engine is to make, how there are glitches in something this complex, but that he was none too happy about it and neither are the customers because they are clamoring for it.
I listened to the call. I totally got his frustration. I even was concerned that Alcoa (AA) , which has a piece of the engine, was at fault and that's a stock we own for my charitable trust, which you can follow along at Action Alerts PLUS. Fortunately it isn't. But you now what? It didn't matter anyway because investors listened to Hayes and decided to dump the stock -- it fell about two bucks -- because they reasoned it wasn't a supply of engines that was a problem, it was a slackening in demand. It didn't matter that Hayes spent a considerable amount of time explaining the production problems. The long knives were out and United Technologies brought down the whole sector. Did anyone bother to listen to the call besides me? Certainly not the reporters, several of whom talked about demand slackening. It was incredibly inconsistent with what was actually said.
Then how about Wells Fargo (WFC) ? Here's a company that's had some of the worst publicity imaginable about its cross-selling misdeeds that has now brought its CEO to the Senate for questioning. It was a weird hearing because anger at CEO John Stumpf actually brought together both Democrats and Republicans in condemnation. Stumpf united the aisles against, well, Stumpf.
So, did the stock get hammered as you would expect? Nope, it had its biggest day in ages, up almost 2%. Why? Because, I believe, short sellers felt like they had to bring in their bets because of a possibility of a surprise rate hike at tomorrow's Fed meeting. Whatever the negative publicity and fallout might be, Wells Fargo's stock is expected to be one of the top beneficiaries of a rate hike, which, of course, we know trumps all.
Or how about the bizarre disconnect between what analysts are saying about Apple (AAPL) sales and what the sellers of Apple are saying. This morning we were treated to what I regarded as an extremely negative note from Piper Jaffray's Gene Munster about how the new iPhone 7 may not have the legs at this point and demand seems to be petering out much faster than usual.
But when I interviewed Marcelo Claure today, a true guerilla fighter in the vein of competitor John Legere over at T-Mobile (TMUS) , about this note he point blanked dismissed it saying that sales are even stronger than he expected since the launch. It is not a question of who do you want to believe. It is more a serial commentary where first Munster knocks the stock down with his note and then Claure boosts them right back with his comments. Hence the gyrations of Apple's stock throughout the day.
We see these inconsistencies constantly. We get the word from noted fund manager Bill Miller that Valeant (VRX) is in much better shape than we thought, with easier debt pay-down and a lot more in the pipe to make it so you don't want to be overly worried about that balance sheet. Today, Deutsche Bank issues a Hold recommendation talking about how difficult it might be to trim down the $30 billion in debt, directly contradicting Miller's comments. I mean who are you supposed to believe? Or is this just such a battleground it's important not to even get involved? I think so.
Or how about this one. Allergan (AGN) paying a -- are you ready, skidaddy? -- a 710% premium for a small biotech company, Tobira Therapeutics (TBRA) , because it might have a drug for liver disease, even, as recently as two months ago, we learned that the company's drug didn't meet its primary endpoint.
Or one more, Urban Outfitters (URBN) and L Brands (LB) talk positive about how fashion is back for women and they are spending again, But then again, last night Ascena (ASNA) comes out and bemoans that women have cut back their buying, even though it has the right fashion at Dress Barn, Justice, Maurice and Ann Taylor, perhaps because there is weakness in the oil patch and in agricultural markets in the Midwest.
Which is it? I tend to think that Urban's got it right as its stock is up 56% for the year. Ascena's has been pulverized, however, dropping 29% in one session.
Now it's pretty much been this way all of 2016. We've had big runs in stocks only to have them be repealed on absolutely nothing but a note about the macro from some government division or a report from another company in its sector that isn't doing that well, quickly nullifying the last positive data point. It's the kind of thing that inspires zero confidence and that lack of confidence is what keeps so many investors either on the sidelines or streaming out of the exits well before the game actually ends with the only players being the professionals who do nothing but trade off the Fed and the price of oil.
All I can say is, what a revolting development.
