Can investors please make up your minds?
Or can we just expect more torture than we have already experienced about how good -- or bad -- things really are.
Tuesday's the perfect microcosm of what I am talking about.
Yesterday we heard from Carnival (CCL) , Darden Restaurants (DRI) , Micron Technology (MU) , FedEx (FDX) Stitch Fix (SFIX) and Red Hat (RHT) and I can say, confidently, that all of these companies are doing quite well.
That's not even an issue.
It's the relationship of the stock price to the company's future that's at once compelling, confusing and downright stupefying.
It's compelling because I could make a strong case that not one of these stocks is currently reflecting either the current acceleration of their revenue growth or the big tax changes ahead.
It's confusing because so many investors we hear from, particularly hedge fund investors but also the everyday strategist/pundits, believe that tax reform is "in" the stocks already because of the market's run.
It's stupefying because many of the analysts and research director types seem to think we have had too much of a good thing and that the entire ball of wax is ready for a meltdown.
That's the case in every one of these.
Let me spell it out.
Now, each company and each stock does vary, as you would expect, depending upon how bullish or bearish investors were going into the quarter.
For example, if you look at Darden, the previous quarter saw no real acceleration of earnings or sales and it led you to believe that people weren't going out to sit-down casual dinners as they had been.
That perception seemed to stun people and the stock sold off hard.
So, going into the quarter investors expected little and short-sellers abounded.
Instead, what we got was a cornucopia of positives, everything from an almost tripling of same-store sales to higher prices, more guests and a very good gross margin despite a large increase in to-go orders, which historically aren't as good in the industry as those who come in can spend a lot of money on liquor. The positives weren't limited to Olive Garden but included LongHorn Steakhouse and, soon, perhaps, Cheddar's Scratch Kitchen, its recent acquisition.
The plethora of greatness overshadowed worries that this 24% taxpayer wouldn't benefit from the change in the tax law but would do better, of course, if the average worker customer did better.
In other words, Darden fits into the pure "compelling" camp.
In descending order, though, next comes Carnival, with a compelling story but one where the analysts still seem to fret about how much cruise capacity is coming on and whether ticket prices can keep going up. It's a confusing question because Arnold Donald, the CEO, has reassured you time and again about how there is an imbalance between excellent demand and constrained supply. At one point he even resorted to saying that if you compared cruise ships to hotel rooms they represent only about a 2% of the hotel industry's rooms, plenty of white space before they ever meet the demand.
It confused me because I think the stock should have been up much more. Maybe it will occur.
Micron's story seemed very compelling to me because, typically with a price-to-earnings multiple of five, you would expect the company to tell you that 2018 can't be all that good and it had to slash estimates. That's what is supposed to happen when a multiple goes that low. In other words, it will turn out that the multiple is, say, 15, not five, because two-thirds of the earnings are about to disappear.
It didn't happen and because of that Micron's stock is being bid up. Still I find it stupefying that the analysts refuse to see that we are still early in the adoption of all the new uses of chips in the data center, the connected home, the autonomous car, and even crypto-currency mining. The higher end, more proprietary nature of the new flash and DRAMs means nothing to the analyst "community" because the prices of both have come down from their peaks.
I sensed no real enthusiasm for the situation on the call, and I know many of the analysts expect prices to continue to roll over, yet they still raised their price targets.
You want confusing? Take FedEx. Here's another stock that's supposed to roll over because of increased costs to handle all of its seasonal business as well as too much dependence upon Amazon (AMZN) .
Yet I found the story incredibly compelling because of the secular growth of e-commerce and the omnichannel, a powerful surge so strong that Amazon is only about 3% of the mix. The fact that earnings could increase by $4.40 to $5.50 if the tax bill becomes law seems to mean little to anyone. Yet I think it's major and worth far more than the meager percentage increase to the stock overnight.
Red Hat? What can I say? The stock's up 84% going in so when it delivers a great number as it did, people have to come up with reasons why it can't go higher. I couldn't find any so call me confused about why the stock is down.
Finally, I get that Stitch Fix had a bump in expenses; everyone knew that was coming, so call me totally stupefied why it is regarded as shocking.
Altogether, yesterday was a day where everything was good, but, overall it was regarded as "too good." Too boom. Has to lead to a bust.
I say maybe not. I was compelled by every story. Every one.
Maybe I am an outlier but I think there is a compelling case to be made for the stocks of each of these companies -- with the possible exception of Stitch because it's moving into some very hard categories like men's and plus which makes me feel that the costs will ultimately be higher per customer.
I am confused why they aren't all going up, perhaps big, and stupefied that so many think that we are about to have a bust more than a boom.
Call me in the boom camp. And a boom that's early, not late, which means the stocks can still climb from here.
I will be stupefied if they ultimately don't do so.