What a day Thursday turned out to be. The S&P 500's 3.5% drop represented the 11th "volatile" trading day (defined as days the index rise or falls at least 1%) in the past two months, but just the third negative occurrence during that timeframe. What spooked many, however was the magnitude of the drop, as it was the largest we've seen since the 5.89% drop on June 11.
The relative period of calm we've experienced over the past couple of months, until Thursday that is, has masked earlier 2020 volatility. By way of a painful reminder, between February 21 and June 30, encompassing 91 trading days, the S&P 500 experienced 63 "volatile" days, including 26 that were in excess of a 3% rise or fall. There were 10 days during that stretch of moves greater than 5%. How quickly we forget.
Thursday's action was particularly unkind to growth names. Within large-caps, the Russell 1000 Growth Index was down 4.9%, while R1000 Value dropped 2.12%. Performance was similar within small-caps (R2000 Growth -4.04%, R2000 Value -1.85%) and micro-caps (RMicro Growth -4.32%, RMicro Value -2.03%). It was nice to see value hold up better, but it was a very small victory. Year-to-date value is still getting trounced by a wide margin. R1000 Growth is beating R1000 Value by 3676 bps; performance gaps are not as wide within the R2000 (2160 bps) and RMicro (2376 bps), but are still substantial. This too shall pass.
Meanwhile, the wacky world of retail keeps getting wackier. Retailer At Home (HOME) , which I briefly owned in 2019 (four months is but a second for a value investor), was much better than the coveted ten-bagger between the COVID lows in April (when it traded as low as $1.20) and Wednesday, when it closed at $23.33.
But since putting up better-than-expected 2nd quarter results (earnings per share of $1.41 beat the consensus by $0.10), it has given back 34% -- and that was in just two days. Shares rose 22% on Monday before the earnings release, but evidently, investors were expecting even better results. It was still a remarkable quarter, nonetheless, with a 42.3% increase in same-store sales in this environment. Not sure if I'll take another bite of this apple, though.
Elsewhere in retail, I'd nearly forgotten that I had a position in Vera Bradley (VRA) , which popped up 32% after reporting much better-than-expected second quarter results on Wednesday (EPS of $0.39, versus the $0.07 loss consensus). Revenue of $131.8 million beat the consensus by $31.3 million, courtesy of strong performance by Pura Vida, in which VRA took a 75% stake in July 2019.
The company ended the quarter with $77 million, or $2.32 per share, in cash and investments and $30 million in debt. Debt was down from $60 million last quarter, as VRA paid back $30 million on its revolver, which was tapped due to the pandemic. VRA currently trades at 7x next year's consensus estimates, one of the lowest valuations I've seen on the name since taking a position just over three years ago, which, I might add, is still under water.
Have a wonderful Labor Day Weekend.