Over the weekend I distributed a short poll to clients. I don't do this type of thing normally as it adds another piece of digital mail to an already full inbox. But, I have a sense that complacency in the market is really setting in. The latest fuel to the fire is the notion underperforming fund managers will be purchasing stocks at lofty valuations hand-over-fist into year end.
Here are a couple of questions that I asked clients, I encourage you to use them to test your complacency on the markets.
- When was the last time you reviewed a company's three financial statements and outlined how they could take shape three to five years into the future?
- Did you read at least five free earnings call transcripts from the third quarter earnings season?
- Without doing a Google search, what was the number of jobs created in October? Bonus: know the number of prior month revisions?
- Are you now buying shares of below market price-to-earning ratio multiple stocks -- likely year-to-date laggards -- on a belief that no Fed taper means renewed prosperity for companies with fundamental challenges?
- Are you completely avoiding valuation checks on those companies growing sales and earnings by the fastest rates in a particular sector? In your mind, does paying 25x forward earnings to own a 15% grower in a 13% growth sector seem akin to a can't miss, safe opportunity?
- Do selloffs in the broader market of any percentage appear to indicate a great deal of nothing regarding the future?
I am still tabulating the findings of this poll, though this much is for sure: individual investors are starting to abandon rigorous research efforts and tried-and - true investment principles to reach for "hot" stocks. This helps to make those in at strategically lower prices a boatload of money as they consider in strategy meetings dumping in January 2014.
That performance chasing puts all sorts of stress on a provider of investing guidance such as yours truly. Do I forget books of lessons learned through the years to recommend "leading stocks" just so a client secures a quick point or two? Or, should I think that everything is about to explode all over the faces of the greedy and the current/outgoing members of the FOMC? This internal debate, in my view, is a byproduct of the prolonged easy money policy of an unchecked governing body, and it's becoming seriously disturbing.
Sure, you could be a rockstar stock-picker in this environment until it ever so slightly heads south, which you won't believe is a concern, and continue to suggest long-exposure. Then one 15% correction later, many clients are lost for eternity.
I am not cautious or bullish, more appropriately opportunistic for as long as I could continue to make sound investment cases on pieces of companies that open for trade at 9:30 a.m. EST.
Chart of the Day
The shocker of an earnings report from Macy's (M) continues to linger in my analytical brain. Packed parking lots at Toys R'Us locations this past weekend caught my attention. Why did Wal-Mart (WMT) shares advance on another soft quarter and limp outlook? You catch those lines at Best Buy (BBY) and GameStop (GME) for the new PlayStation 4 on Friday (presently sold out at Wal-Mart, Amazon (AMZN), GameStop, and Best Buy; oddly Target (TGT) is not even offering the console online). Are we headed towards a surprisingly robust holiday season? Not ready to make that call, but the outperformance in credit card stocks MasterCard (MA) and American Express (AXP) adds another layer of intrigue.
- I am scheduled to be on the Fox Business Network today at 12:30pm EST to discuss a company I have intimate knowledge on. You should watch, and tweet thoughts @BrianSozzi @FoxBusiness.
- This week I am talking with the teams at Starbucks (SBUX), Best Buy, J.C. Penney (JCP), and Target. If you own these names or competitors, please do reach out by sending an email to firstname.lastname@example.org with any questions.