Finally, baseball is back, and the purgatory that occurs (for me anyway) between the end of football season and opening day of America's pastime is over. There were a few nice surprises yesterday in Philadelphia, as the Phillies opened at home amid the anticipation of $330 million Bryce Harper's debut. However, Harper's 0-3 performance with two strikeouts was not among them. That didn't seem to bother the fans at least where we sere sitting - yet that is - but I maintain that Harper has about 10 at bats to do something before the mood begins to sour. He is the equivalent of a FANG stock trading at very high multiples; much is expected. Andrew McCutchen's lead-off homer, a Rhys Hoskins grand slam, and 3-run shot by Maikel Franco brought the excitement and plenty of offense for a win.
Meanwhile, today ends the first quarter of 2019, one that has held plenty of its own surprises. The fourth quarter's dreadful performance may seem like a distant memory, but it was quite brutal as the S&P 500 fell 16%, while the Russell 2000 and Russell Microcap Indexes dropped 20% and 22%, respectively. While the first quarter's performance has been surprisingly strong, with the S&P 500 (+12%), Russell 2000 (+14%), and Russell Microcap (+13%) all delivering, pending a huge day on Friday, it has not made up for last quarter's lost ground. Perhaps surprisingly, stock performance has been fairly muted over the past year, with the S&P 500 up about 6.6%, the R2000 has gained less than 3%, while the RMIcro Index is down 2%.
There were also several single security surprises during the quarter. Here are just a handful across the market cap spectrum:
- Within large caps, Kraft Heinz (KHC) (-23% year to date) continues a rough run, following down years in 2018 (-41%) and 2017 (-8%). Rough fourth quarter results, and a 36% dividend cut have added to the company's woes, and investors remain skeptical at this point. Heinz now trades at just under 12x 2019 consensus estimates, and yields about 4.9%.
- Small/mid-cap name Bed Bath and Beyond (BBBY) (+56%) has recovered nicely since falling below $11 in December, as markets continue to grapple with brick and mortar retail valuations. BBBY currently trades at less than 9x 2019 consensus earnings estimates and yields 3.7%.
- Smaller retailers Hibbett Sports (HIBB) (+57%) and Vera Bradley (VRA) (+55%) also provided some nice surprises as the specialty retail roller coaster ride continues. HIBB and VRA currently trade at about 14x and 19x this year's consensus estimates, respectively
I wonder not only what second quarter surprises await us, but also when Bryce Harper will get his first hit as a Phillie. I remain among the very few Phillies fans that were skeptical of the deal in the first place, yet I hope to be proven wrong.
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