Strong Defensive Day
Posted by Eddy Elfenbein on May 29th, 2018 at 3:42 pm

If you’re ever curious if a particular stock is a “defensive” stock or not, a simple test would be to see how it did on May 29, 2018. If it beat the market, then yes, it’s very likely a defensive stock.

The stock market took a tumble today thanks to worries about Italy. The Dow is currently off about 400 points. Most of the damage has spared defensive stocks. By this, I mean sectors like REITs, Utes and Consumer Staples. Hormel is actually up today.

“A Bull Walks Up the Steps, a Bear Jumps Out the Window”
Posted by Eddy Elfenbein on May 29th, 2018 at 11:01 am

There’s an old Wall Street expression that “a bull walks up the steps while a bear jumps out of the window.” (I’ve seen many different formulations of this quote.) The idea is that the market rises slowly while the downturns are sharp and fast.

This is very true and it’s an important part of investing. We can even see this effect with the stock market this year. The S&P 500 peaked in late January, and it’s been pretty much sideways since then. Twice, the S&P 500 close more than 10% below its high which is the traditional boundary of a correction.

But if we dissect this a bit, we can see a different market. The S&P 500 fell a combined 6.1% over two days, Friday, February 2 and Monday, February 5.

Please note that I’m not saying that the market fall didn’t happen. Rather, I’m saying that the bulk of it happened in a very small timeframe. Those two days have always counted for most of the lost ground since January 26.

I’ve often noticed that when people start debating if a market correction is going to happen is about the point the correction has passed.

The Stock Market’s Compressed Range
Posted by Eddy Elfenbein on May 29th, 2018 at 10:47 am

Over the past 13 trading days, the S&P 500 has traded within a very narrow band. Not once has the index left the range of 2,698 to 2,742. That’s about 1.5%.

The index is still above its 50- and 200-DMA; however, a retest may come soon. A narrow range could be the precursor to a strong move in either direction. For now, though, the market is listlessly drifting in a very narrow range.

Morning News: May 29, 2018
Posted by Eddy Elfenbein on May 29th, 2018 at 7:25 am

Political Uncertainty in Italy, Spain Roils Markets

Truckers’ Strike Paralyzes Brazil as President Courts Investors

Oil Is Still Going To $80

US and EU Dig in on Dispute Over Airbus Subsidies at WTO

EU Proposes to Ban on Plastic Straws, Stirs, and Cotton Buds

Bank Indonesia’s Call for Special Meeting Welcomed by Investors

Dodd-Frank Rollback Will Reinvigorate Main Street

Swiss Re `Open’ to Anchor Investor as SoftBank Talks Fail

De Beers to Sell Diamonds Made in a Lab

JAB to Buy Sandwich Chain Pret A Manger From Bridgepoint

The World’s Biggest Ever Semiconductor Merger May Be Back on Track, Thanks to a China Thaw

Tech-Savvy Buskers Now Accepting Card Payment

Lawrence Hamtil: Your Focus Should Be On Risk, Not Reward

Howard Lindzon: Momentum Monday – Software is Hungry All The Time

Roger Nusbaum: Creating Your Own Antifragility

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Morning News: May 28, 2018
Posted by Eddy Elfenbein on May 28th, 2018 at 6:36 am

OPEC and Allied Producers Have Already Cleared Oil Surplus

The Next Privacy Battle in Europe is Over This New Law

Why Voters Are Unlikely to Punish Erdogan for the Lira Turmoil

Brazil Reaches New Deal to End Truck Drivers’ Strike

Why India’s New Bankruptcy Law is Reshaping Big Business

Qualcomm to Meet China Regulators in Push to Clear $44 Billion NXP Deal

Money Is About to Flow Into China, Just as It Pours Out of Tencent

China Industrial Profit Growth Accelerates on Improved Margins

Bombardier Plans Two New Luxury Aircraft Amid Growing Demand

Thousands of Chipotle Workers Could be Shut Out of Wage-Theft Lawsuit by New Supreme Court Ruling

Here’s the Maximum Social Security You Can Get If You Claim at 62

Vintage Levis Jeans First Bought In 1893 Sells For Nearly $100K

Ben Carlson: Playing in Traffic

Jeff Miller: Should Investors Ignore the Shifting Geopolitical Winds?

Roger Nusbaum: Revisiting Ranchester

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Spam Recall
Posted by Eddy Elfenbein on May 27th, 2018 at 3:29 pm

From Money Magazine:

Spam lovers beware.

A recall has been issued for 228,614 pounds of the famous canned meat product due to contamination from shards of metal.

The recall was announced Saturday after Hormel Food Corp., which manufactures Spam, “received four consumer complaints stating that metal objects were found in the canned products,” according to the United States Department of Agriculture.

The types of Spam affected are 12-ounce “Spam classic” cans, which were shipped nationally across the U.S., and 12-ounce “Hormel Foods Black-Label Luncheon Loaf” cans, which were only shipped to Guam.

The canned meat products were produced Feb. 8 through Feb. 10 and the USDA’s Food Safety and Inspection Service said it is concerned some of the Spam product may still be in people’s homes.

While only reports of “minor oral injuries” have been reported, anyone worried about further sickness or injury should get in touch with a health care provider. Regardless of illness, any Spam cans fitting the description “should be thrown away or returned to the place of purchase,” according to the USDA.

Here’s what to look for on the labels of Spam to check whether you have a potentially contaminated product:

Spam Classic: a “best by” date of February 2021 and production codes: F020881, F020882, F020883, F020884, F020885, F020886, F020887, F020888 and F020889.
Hormel Foods Black-Label Luncheon Loaf: a “best by” date of February 2021 and production codes F02098 and F02108.
If you have any questions or concerns about the recalled Spam you can contact Hormel Foods’ consumer response at (800) 523-4635.

Reagan’s Remarks at the Veterans Day 1985
Posted by Eddy Elfenbein on May 27th, 2018 at 2:08 pm

This is Ronald Reagan’s speech for Veteran’s Day in 1985, but I thought it was appropriate for Memorial Day.

Hormel Rebounds
Posted by Eddy Elfenbein on May 25th, 2018 at 11:04 am

We had two earnings reports yesterday. Hormel Foods was in the morning and Ross Stores was after the close.

Yesterday, Hormel opened sharply lower but moved back up as the day wore on. We saw the same thing happen recently with Cerner. That seems to be a common move — traders panic and only slowly regain their senses.

Ross Stores is down this morning just as HRL was yesterday. We may see another rebound. Their earnings report looked just fine to me.

Morning News: May 25, 2018
Posted by Eddy Elfenbein on May 25th, 2018 at 7:06 am

Russia, OPEC Members to Discuss Easing Oil Output Cap

Europe to Clinch Cheaper Russian Gas With Gazprom Deal

Erdogan Needs to Leave Turkey’s Central Bank Alone

BOE’s Carney Says His Guidance Is Vital in ‘Crucial’ Brexit Phase

Tech Companies Scramble as Sweeping Data Rules Take Effect

Rusal CEO Quits Amid Pressure Over U.S. Sanctions

Disney Wants to Kill Netflix, But Comcast Has Totally Different Reasons for Wanting Fox

Doctor, No: Short Seller Steps Up Fight With Samsonite Over CEO’s Credentials

Chesapeake Energy: Still Ugly

Maker of Necco Wafers Gets Sweet Reprieve at Bankruptcy Auction

What the Hell Happened at GE?

J&J Verdict Reaches Almost $26 Million in Baby Powder Trial

Joshua Brown: Stock Prices Are a Proxy For Our Beliefs About the Future

Blue Harbinger: The Most Costly Trading Mistakes To Avoid

Jeff Carter: Perpetrating a Fraud

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Ross Stores Earns $1.17 per Share for Q1
Posted by Eddy Elfenbein on May 24th, 2018 at 4:05 pm

Ross Stores (ROST) just reported fiscal Q1 earnings of $1.17 per share. The company had projected earnings of $1.03 to $1.07 per share. They made 82 cents per share for last year’s Q1.

Ross said they were helped in Q1 by 17 cents per share due to tax reform plus two cents per share thanks to “the favorable timing of packaway-related expenses that we expect to reverse in subsequent quarters.”

Q1 sales rose 9% to $3.6 billion, and comparable-stores sales were up 3%. Ross had been expecting 1% to 2%. I knew that forecast was too low.

Barbara Rentler, Chief Executive Officer, commented, “Despite unfavorable weather throughout the period, we achieved above-plan growth in both sales and earnings in the first quarter. Operating margin for the period of 15.1% was down slightly from the prior year as an improvement in merchandise gross margin and favorable timing of packaway-related expenses were offset by higher freight costs and wage-related investments.”

Ms. Rentler continued, “During the first quarter of fiscal 2018, we repurchased 3.3 million shares of common stock for an aggregate price of $255 million. As planned, we remain on track to buy back a total of $1.075 billion in common stock during fiscal 2018.”

Looking ahead, Ms. Rentler said, “For the 13 weeks ending August 4, 2018, we are forecasting same store sales to be up 1% to 2% over the 13 weeks ended August 5, 2017. Second quarter 2018 earnings per share are projected to be $.95 to $.99, which includes the benefit from lower taxes, partially offset by the previously mentioned shift in packaway expenses.”

Ms. Rentler continued, “Based on our first quarter results and guidance for the second quarter, we now project earnings per share for the 52 weeks ending February 2, 2019 to be in the range of $3.92 to $4.05, which includes the benefit from lower taxes.”

That’s up from previous range of $3.86 to $4.03 per share. Shares of ROST are down about 4% in the after-hours market.