Mr. Sensitive

January 31, 2014

FSX Friday Update

Filed under: Uncategorized — lbej @ 17:00

This was a big week for earnings, with nearly 10% of the S&P 500 reporting on Wednesday alone.  The four reports that garnered the most attention came from Apple, Facebook, Google, and Amazon.  For perspective, here’s how those four tech giants stacked up going into the week:

  • Apple: $500 billion market value (#1 in the US), +5% in 2013
  • Google: $375 billion market value (#3), +58% in 2013
  • Amazon: $175 billion market value (#15), +59% in 2013
  • Facebook: $135 billion market value (#25), +108% in 2013

Apple—the biggest winner of the 2009-2011 period—underperformed the market last year and underwhelmed the Street this week with billions in profits but bupkiss in new product buzz.  Investors had begun to speculate that CEO Tim Cook might have more to offer besides arrogance and supply-chain expertise, and the stock rallied more than 40% in the second half of 2013.  That speculation may finally be dead, killed by this moribund earnings report.  Apple’s culture of innovation died with Steve Jobs, and now it’s nothing more than Microsoft 2.0.  Investors knocked 9% off the stock this week.

Google announced the sale of Motorola to Lenovo for less than $3 billion (it paid $12 billion two years ago), missed on profit and revenue expectations, and rallied 5% to a new all-time high.  Google is what Apple was until 2010—the market gives it a pass on its quarterly results because no company is thought to have a better shot at finding the next big thing.  At this point, at least, it’s hard to argue that perceived best-in-class Bell Labs-like corporate creativity.  Google also makes money—more than $12 billon over the last 12 months—and isn’t insanely expensive at 30 times earnings.  It isn’t cheap, either.

Facebook—2012 IPO basketcase and 2013 turnaround business case—blew away Street expectations for the fourth straight quarter.  FB has executed brilliantly on its mobile strategy, and has gone from hated to loved (and from $19 to $62) in an incredibly short time.  The stock was up 20% after its earnings release and will doubtless be upgraded by every analyst on the Street even after that surge.  It’s terrificly expensive at more than 100 times earnings, but it’s also growing revenues and profits at a terrific rate.

Then there’s Amazon.  AMZN reached a new all-time high above $400 a share before its Thursday earnings report, giving it a P/E multiple of 1,300.  That’s right: an e-commerce giant, a public company since 1998, and the biggest retailing success story since Wal-mart, and it made all of $0.28 per share last year.  Why?  Because The Bezos and his Street acolytes don’t care about profits—they care about streaming media and grocery delivery and drones and whatever else there is.  He is The Bezos, after all, and he doesn’t have to break out lines of business or tell anyone anything about anything.  Every quarter for the last several years, Amazon has missed badly on earnings and revenue, and the stock has been up anyway.  This quarter, Amazon missed badly on earnings and revenue, and said that it probably won’t make any money(!) in 2014.  Incredibly, unbelievably, the stock got crushed on Friday, falling by 11% with no late-day bullish reversal.  All I can say about that is that it’s about damn time.  Now let’s see if the bloom is finally off the Bezos rose.

The Family Stock Index stunk it up yet again this week, sliding by 2.2% and badly underperforming the broader market.  The major indexes have had a tough January (just as I predicted in my 2014-is-2000 scenario), but they’ve all preserved their long-term bullish trends.  The FSX, not so much.  We knifed below the 200-day moving average on Thursday, closing below that key long-term technical support level for the first time since November 2012.  We did bounce sharply on Thursday but pulled back again Friday, with price action worsening into the close.  I realized the FSX absolutely had to hold the line at the 200-day—16.230—if the bears were to be kept at bay.  It closed at 16,190.

Now is the time to panic.

Advancers

  • Reagan (REGN) +3.2%.  Reagan won her school spelling bee with ease, just as she—and everyone else—expected she would.  Her stock actually sold off on the news, meaning that the market had anticipated a victory and had priced it in.  Since that January sell-off, however, REGN has traded sideway, languishing nearly 30 points below its 2012 high.  Now, with the county bee upon us, investors have been forced to place their bets.  This week’s rally—against the tape—tells me that the market’s in Reagan’s corner.
  • Dustin (DST) +2.5%.  I’ve long thought that Dustin and I have a similar reaction to idiots giving orders—we’re both allergic to that shit.  The difference is that Dustin’s skill set validates his disdain, whereas mine does not.  That’s why DST reported strong earnings this week and traded up to a new all-time high, while TGI…well, you’ll see.
  • Charlotte (ICE +2.2%).  The UNC transfer application is in…now we wait.  Like Reagan, Charlotte rallied powerfully in 2013.  Also like Reagan, she is facing lofty investor expections for 2014.  And this week’s rally in the face of a market rout suggests that, like Reagan, she’s likely to succeed.
  • Winston (ED) +1.4%.  Katie won a celebrity stroller when she was tweeting the Grammys and she sent it to Mario and Nicole.  So I guess that twice-removed Twitter-stroller victories are a good way to goose a stock.  I’d hate to break it to Winston that the stroller isn’t for him.  Actually, I’d love to break it to him, now that I think about it.

Decliners

  • Katie (CATY) -3.9%.  Girl Scout cookies.
  • Brinkley (BCO) -4.0%.  He’s been relegated to sleepers again, on account of he strips if he’s wearing anything else.  I imagine the sleeper as a colorful prison jumpsuit, and I hope he does, too.
  • Ruby (RJET) -4.2%.  Ruby returned to her island paradise after a month on the road, only to be greeted by…snow?  She’s probably wishing she was still in Vegas.
  • Lucas (CTG) -7%.  High school is coming, and no amount of ticker-switching can stop it.
  • Justin (XOXO) -11%.  Ready to ramp things up again in February!  Team DW!  Right, Justin?  …Justin?
  • Lee (TGI) -11.1%.  It was a bad week for me—the market got this one right, and I’m not even going to try and play it off.  I’m also not going to say anything else about it.  The only piece of good news is that TGI held up in the Friday selloff, suggesting that the bulls (yes, there were a few) were completely washed out on Wednesday and Thursday.  At this point a lot of the Lee-specific negatives have been factored in and underperformance should be limited going forward.  Unfortunately, there’s no positive catalyst on the horizon to make up for this week’s disaster.  Absent such a catalyst, I should trade with the market—locking in this week’s losses—for the foreseeable future.  Basically, I need something good to happen.  Something with the book, maybe, or improvements in Brinky’s behavior and development, or even some happy, exogenous event that would serve to reverse (justifiably) bearish sentiment.   I’m controlling what I can control, but the market is telling me that it isn’t enough.  I knew that already, of course, but I deserve the reminder whether or not I need it.

 

Name Ticker 1/31/2014 Change
Brinkley BCO $31.64 -1.32
Charlotte ICE $208.79 +4.43
Dustin DST $91.00 +2.24
Icarus FAST $43.93 -1.16
Jenny GNE $10.00 +0.05
Jodi Ann JOY $52.79 +0.09
Josie Ann JCOM $45.35 -1.68
Justin XOXO $12.13 -1.50
Katie CATY $23.50 -0.96
Lee TGI $68.42 -8.56
Lisa LNCE $26.71 -0.58
Lucas CTG $16.16 -1.21
Lulu LULU $45.69 -1.93
Marcus MCS $13.06 -0.47
Mario T.E. MGEE $56.98 -0.08
Mario T.Y. MAR $49.30 -0.46
Namilita NL $11.04 -0.01
Nicole E. NICE $39.45 -1.13
Nicole M. COLM $74.35 -0.19
Reagan REGN $288.59 +8.98
Ruby RJET $9.81 -0.43
Wilson WILC $8.12 -0.20
Winston ED $54.41 +0.76
Zero Z $82.10 +1.32
Zondro ZQK $7.05 -0.08

 

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