Just like clockwork, the markets are back to mid-summer roller coaster ride territory. At this point it's not like Disney's Expedition Everest, Space Mountain or Rock n' Roller Coaster, but just enough to make you feel that you are definitely on some kind of ride, and it's not exactly unpleasant, at least at this point.
Since my Wednesday column ran the S&P 500 has experienced two more "volatile" days (with volatility defined as up or down at least 1%), and both have been of the positive variety. As I write this early Friday, futures are in negative territory, so it looks like it could be another interesting ride for the markets.
Despite recent volatility and uncertainty year-to-date returns have been strong for the S&P 500 (up 17%), and small-caps as represented by the Russell 2000 (up 14.5%), though microcaps as represented by the Russell Microcap Index (up 8.2%) have lagged considerably. However, looking back one year paints an entirely different picture. Markets have all but treaded water, or worse, with the S&P 500 up less than 3% and the Russell 2000 and Russell Microcap both in negative territory, down 7.9% and 15.7%, respectively.
Value has not fared well, either, over the past year when compared to growth, at least in large and small caps. For large-caps, the Russell 1000 Growth Index (up 4.8%) has doubled the performance of the Russell 1000 Value Index (up 2.4%), while the Russell 2000 Growth (down 4.4%) has beaten the Russell 2000 Value (down 11.4%) by a whopping 700 basis points. In microcap land, however, the Russell Microcap Value (down 15%) has outdistanced, though barely, the Russell Microcap Growth (down 16.5%). No matter what, value investors, especially in more distressed names, have felt the pain.
One of the more interesting stories for Friday is the plight of toymaker Mattel Inc. (MAT) , which has had its share of troubles in recent years but had put together a nice run year to date (up 34%) after terrible runs in 2017 (down 41%), and 2018 (down 35%). Late Thursday, Mattel scrapped a $250 million senior note sale due to an anonymous letter of undisclosed content from a whistle blower that the company became aware of on Aug. 6 and is now investigating. This is a bizarre situation to say the least, and one that has MAT shares down about 7% in pre-market trading.
Toymakers have suffered a great deal in recent years, especially due to the Toys R Us bankruptcy; look no further than to JAKKS Pacific Inc. (JAKK) , which released second-quarter results pre-market Friday morning. While revenue was about in line with expectations, JAKKS missed on the bottom line (an 83- cent loss versus a 56-cent loss consensus). Perhaps the most interesting news here was that the company has entered into agreements with banks and a group of holders of the company's convertible debt that will recapitalize the balance sheet, thus extending the revolving credit facility and convertible debt three years. JAKK has a lot of work to do to right this ship, if that's even possible.
