Without looking at the data, based on the "feel" of the markets, you might think that volatility was back big time. I was even a bit surprised to see that the S&P 500 has experienced just three volatile trading days (one where the S&P 500 rises or falls more than 1% in a day) in the past 38 trading days. However, three of these have occurred in the past 13 days; still not ridiculous based on what we've seen over the past 10 years, but perhaps enough to bring forth some investor angst.
Month-to-date we've seen some cracks with the S&P 500 (-4.2%), Russell 2000 (-5.6%) and Russell Microcap Indexes (-4.3%), all sucking wind as we head into Memorial Day Weekend. We've also seen value again underperforming growth with R2000 Value (+9.6%) behind R2000 Growth (+11.9% by 2.3%), and an even wider spread between RMicro Value (+8.5%) and RMicro Growth (+12.5%).
It's become a difficult environment for "dumpster diving", buying down and out names that have been seemingly over-punished by the markets, because the market generally continues to punish them further. I am hoping the opportunities will become more compelling this summer, when volume falls, and market efficiency falls along with it. That's the environment that gave us all of the opportunities in specialty retail a couple of summers ago.
There was not much green on my screen yesterday, but I did take notice of retailer Cato Corp (CATO) , a cash rich name that has seen same store sales drop precipitously in some previous quarters, but was up 5% yesterday after reporting a decent quarter. Unfortunately, no analysts follow the name any longer, but it earned 87 cents/share for the quarter, and same store sales dropped just 3%, and the company had a great April, with comps up 16%. Hibbett Sports HIBB ended the quarter with more than $9.50 per share in cash and short-term investments. A large increase in both assets (33.5%) and liabilities (+86%) was due to the change in the way operating leases are now treated. The company is continuing to pay its regular dividend, and yields 9.5%.
Speaking of small specialty retailers, it should be a big day for Hibbett Sports (HIBB) , which reported much better than expected first quarter earnings Friday morning with earnings per share of $1.61 beating consensus estimates by 30 cents. Same store sales rose 5.1%, and the company opened 76 new stores. Company guidance for the full year suggests earnings per share in the $2-$2.15 range, and share buybacks to the tune of $10-$15 million.
Retail has been changing by leaps and bounds, but some of the small players may not be done just yet, and there may still be opportunities to play off the markets' perception that the sector is dead.