This is a market with no underpinnings. Last night, I had Ben Baldanza, the CEO of Spirit Airlines (SAVE) on "Mad Money," and it is amazing to me that this stock can't find its footing. Here's a company with a terrific business model that knows exactly how to run an airline that made a misstep, one misstep, in a previous quarter. The result? It's now down 55%.
When I spoke to Ben last night I was conscious of the fact that business is quite strong, that he doesn't hedge fuel, so it flows right to the bottom line, that he is getting incremental travelers, not just taking share from others -- or losing it, as American (AAL) is subtly hinting -- yet it doesn't matter. His stock is being crushed, hitting its 52-week low yesterday.
Does that make sense? I think it does to a portfolio manager who says "I never want to own a stock that misses again." But at 8x earnings, with business very strong, what's the point of selling it down here? If you own it, why would you dump it? That's hard to fathom.
I was thrilled he came on just to show that 2016 wasn't going to be a down year despite the interpretations from negative analysts and there are multiple levers to make money throughout the country.
Same thing with Starwood (HOT), which is a holding of the Action Alerts PLUS charity portfolio that I co-manage. Sure, it made sense to sell at $85, when it spiked on rumors of a Chinese takeover bid. But who was selling at $69 yesterday, with Marriott's (MAR) stock going higher, knowing that you are going to get a ton of Marriott's stock plus $2 and its timeshare spin-off? Why would anyone want to dump that stock, knowing that business is excellent at Marriott, as the company has said over and over again and Starwood's doing well, too? A million hotel rooms, lots of synergies and terrific cost takeouts, and people want to sell Starwood at $69?
You know who sells Spirit at $32? You know who sells Starwood at $69? I will tell you who: those who are fed up and disgusted and don't want to hear about these stocks anymore. For Spirit, it is someone who says "Ben's model doesn't work in a low fuel environment where others can cut price," even as it is pretty clear that they have two different sets of customers, the pleasure and the business, and there is more than enough pleasure out there for Spirit to make its numbers.
For Starwood, it's the belief that there was something big out there, and when there wasn't there was no reason to hang on even as you are now hitching your star to a winner, not a loser. I think you can ride this thing up to the implied value of $79, even if you are disgusted about it.
Too often we act emotionally, and this has become a very emotional market where you either get the takeover bid or you blow away earnings or you are history.
That's not how it should be. But in these days, there simply isn't any other way.