If it's up it's down, and if it is down it is up?
That's this week's story to a T. Think about it. What high-profile earnings reporters were up the most going into yesterday? How about Microsoft (MSFT) , PayPal (PYPL) and Visa (V) . Do you know that I would buy any one of these now that they are coming down? No expectations were reduced for any of these. The opposite. They were all heightened. But if you read the calls -- or our bulletins on PayPal and Microsoft -- you can see that they missed by ever so slightly because they were never guided down to begin with.
Now consider the curious cases of Facebook (FB) and Apple (AAPL) . The former is flying because we suddenly realize there is light at the end of the cost tunnel. Now they are growing users, growing revenue and margins will stay steady. There is suddenly leverage to the model, which is outstanding. The latter is up because Tim Cook said January was better and there was no further deceleration with services, which had been the big bear worry. So it, too, goes higher.
Neither was crowded with hedge funds seeking shelter. The smart money was short these two for certain.
But how about the ones that came in hot?
With PayPal, we were worried about eBay separation, but as our Action Alerts PLUS bulletin so aptly describes, the weakness was in eBay gross merchandise, not the separation. Business is strong; it will be bought before it falls too far. You needed a big guide-up. You didn't get one.
Same with Microsoft. It's been sainted, but it wasn't sainted enough and it can't rally when it has a shortfall in something related to personal computer shortages. That won't wash, so it has to give up a little, but not much more than that, given the $125 billion it has on the balance sheet. It, like Facebook, can buy shares until the cows come home. I think the buyers come in after a bit of churn.
Visa? Government shutdowns, Brexit, worldwide woes. They all get flagged. But if they weren't, it would have probably gone up huge. That's how good that quarter was.
So take a breath, look where a stock has been. If it's coming in cool, it's a win. If it's coming in crowded and high? That's a loss.
Right now, there is not much else to it other than to say if Jay Powell hadn't given us the all-clear, then we would have a totally different story. But he did.
So buy the weak ones, even if they are up -- think Lam Research (LRCX) . And hold the ones that were up a lot going in.
They won't stay down for long.