When I used to trade for a living, I was always trying to figure out the mood of the market. Was it buoyant, was it depressed, was it goofy, was it downbeat.
If I knew the market's zeitgeist, I could have a better handle on what to buy and sell on the trading part of the portfolio. We needed the additional income, because as a hedge fund manager, you couldn't just own big positions and wait for them to unfold; too many investors demanded performance, often on a daily basis.
Today's market is a forgiving market, a market that's not punishing and often naïve.
Let me give you some examples.
The other day the stock of Chipotle Mexican Grill (CMG) , one of the top performers in the S&P, up more than 90%, got clocked because New York City sued the chain, alleging that it violated some work rules involving scheduling. The stock closed down 5% as part of an overall rout of the restaurant stocks.
Tuesday the stock's vaulting more than 20 points. Why? Because it's adding a new steak dish, the first in three years. The carne asada dish might only be offered for a limited time, but it's got buyers going wild. That's both silly and sanguine, but if you are long Chipotle, you will take it.
The restaurant group itself charged higher, in part because Cracker Barrel (CBRL) put up good numbers. This chain, the most beholden to higher gasoline prices, was Monday's biggest worry, but bounced right back, as if the Saudi oil loss meant nothing.
Then there's Shopify (SHOP) . The company offered 1.9 million shares at $317.50, down about 10 from where most of Monday's trading occurred. It was well-placed and the stock took off like a coiled spring, understandable given that it's been straight down from $409 since late August. It didn't hurt that the company announced an initiative to help sell cannabis-related products in the United States. Sure, it's the hemp version which is legal, not the THC version which is what the real recreational users want.
But it worked, and the stock's just plain giddy.
Then there's Ulta Beauty (ULTA) , which has been in the doghouse ever since it reported a surprisingly difficult quarter. Now it's showing signs of life. I know the cockroach theory, where if you have one missed quarter you will have many missed quarters, but buyers are lining up to take advantage of what seems like a developing floor. Could the punishment be over? It wouldn't surprise me. I think the company's miss was a rate misstep and it might be back on its game.
A little more than a week ago Tyson (TSN) cut guidance, mostly on commodity market volatility. It got slammed, dropping from $93 all the way down to $81. It's working its way back, now challenging $90. That's a forgiving market.
Or Corning (GLW) : It saw a brutal shortfall Tuesday on some display glass issues in the telecom and television. Yet the stock is only down two and change, a little less than 8%. I expected far worse. That's buoyant compared to an anticipated slaughter.
Finally, Nucor (NUE) announced that it would earn 75 cents to 80 cents vs. expectations of $1.03 and the stock had only fractional losses. I think that makes sense. It's the best steel company in the country and perhaps the world, with a fantastic balance sheet, a history of dividend increases and a history of amazing profitability. That said, in a rougher tape it would have been down $2 minimum.
I say this tape reminds me of The Temptations' fabled, "My Girl" lyrics: It's got sunshine on a cloudy day. To me that means take advantage of it and look for the dips. Judging by the "action" I am seeing, the discounts seem too juicy to ignore.
