Today is the hated-stock portion of the rally, the one for companies that nobody really believes in or has much hope for but fit the thesis of either "can't get worse" or "has to get better," with the corollary that they have all moved so it seems just way too late to get in ... but it isn't.
Deere (DE) is the quintessential one of these stocks. This company's stock has moved up for months from the summer when it indicated things weren't so hot, but people started the process of saying, "How could it get worse, the farmers haven't bought new equipment in ages."
It is a classic, counterintuitive rally because what the farmers make -- the actual commodities -- have plummeted in price -- and the company itself has had to deal with weak overseas markets and a strong dollar.
But what they have managed to do on the cost side is nothing short of amazing. It's almost as if they make as much selling one machine as they did selling 10.
There's still no real revenue story. This was all earnings, but the earnings are so powerful -- as I think they will be for Caterpillar (CAT) , too -- that it doesn't really matter. Suspend your beliefs and buy? That's been the mantra for 25 points now.
United Rentals (URI) is another "wing and a prayer" story, one that is a bet there will be a lot of building going on and that the oil patch will return to growth. Lots of people were burned by this one back at the end of 2014 when the company, which had told you it wasn't all that susceptible to an oil decline, got shocked itself -- I really believe that -- and disappointed multiple times.
But when Donald Trump won the election, the "can do" mob that believes in shovel-ready projects as well as those who think pipelines and drilling will be back in vogue have jumped on and it has become a "too good to check out" story.
Or how about Freeport (FCX) ? Boy, have people fought this rally -- there are still many negative analysts -- even as it has fixed its balance sheet "enough" to be able to handle the future while copper has gone up. I call this one a play on oil stabilizing and the bulk freight index and JJC copper subindex going higher. It just keeps going up by dribs and drabs and you keep thinking this can't go on.
But it does.
Then there is Signet (SIG) . This is one of those relentless shorts, the intractable kind where no one is going to declare victory on the short side even as we know now that it is a credit giver for those who want jewelry as opposed to a marketing company for jewelry.
The last quarter? Not good. But the thesis is still intact. More important? As the economy gets stronger, the lending side does well.
It goes from being a good short to a bad short.
It's just a lousy time to be short heavily shorted stocks.
And that should inform you of what can go wrong at this particular time.
When is the right time to short? I continue to believe that health care has way too much enthusiasm given the strong dollar, weaker new products and an inability to raise price. It's the most overvalued portion of the stock universe, as you can see from the boutique bios, the big drug companies -- the hype artist known as Lilly (LLY) -- as well as anything having to do with devices or generics.
All awful. All still shortable.