"The man of mystery": That's how I look at one of the non-goats from the 2012 Ryder Cup, Jason Dufner. I am convinced the guy does dip, but he is known for displaying next to no emotion on the golf course -- though I did notice a sign of facial expression from this stoic man during the Ryder Cup as he generally rolled over his bilingual European counterparts.
I am similar in this respect -- on most occasions, you will never be completely sure what I am thinking, though have gained a reputation on my ball team for, umm, being a seriously intense and vocal dugout member. Nonetheless, along the course of this week, I was pressed to divulge more of my specific stock-market ideas, and that struck a nerve for these simple reasons. It's not who I am, it's not what I am going to do, and frankly it's not what I am pouring my heart into every day as I attempt to teach interested investors in a 24/7 news cycle, wherever my name may sprout.
Do I have a core set of ideas? Sure -- it's the pitchman aspect that was drilled into my head on the sell side. But I would rather come to the table for a discussion with strong, coherent arguments on stocks and markets, as opposed to matters that don't live up to my high standards. I would sure hope you also have high standards here, beginning with the formulation of macroeconomic and company-specific ideas -- and right on up to the point you decide to pull the trigger, be it long or short.
Unfortunately, at this particular moment, I have taken the bait on offering an idea dump. Full blame goes to the typical build of internal intensity during earnings season prep -- and feeling the aftereffects of voluminous caffeine intake. So below, right here, you'll see the majority of the notes, simplified and edited for cohesiveness, right from my manual.
What I Hear Too Much Of
- There's uber attention on third-quarter earnings, except for the fact that financials and technology are down year over year. More focus has to be on revenue and its components -- that is, volume, prices and currency. Revenue was the negative surprise factor in the second quarter.
- Dry power, dry powder, dry powder: Yes, got it. One place where excess money at non-bucket shops could wind up is restaurants. Private equity loves 'em. DineEquity (DIN) has been acting interesting of late. After the restructuring of subsidiary Applebee's, this would be a pay-up to own a good chunk of Middle America quick casual dining.
- Fiscal cliff: Yup, we see you -- or do we? None of the impact, psychological (among consumers) or actual, has been priced into valuations whatsoever, as machines drive trading. That will be a problem as I run through financial statements.
- Won't China markets have to discount all of the bad news when investors return? How will that weigh on global markets?
- ADP should no longer front-run the nonfarm payrolls report to help its marketing department; the release should be the same day as that of the Labor Department. By the way, downward revisions in the latest ADP report are not good. I wonder how the revisions will look after August, when the estimate on new jobs in June and July was reduced by 41,000.
- There was strong improvement in new orders in the Institute for Supply Management nonmanufacturing index, but the employment component fell. Weird.
Dot-Connecting/Research to Conduct
- I'm seeing ugly action in suppliers to department stores Maidenform (MFB), Perry Ellis (PERY), Carter's (CRI) and Fifth & Pacific (FNP) -- especially the latter post-earnings. It'd be best to circle back on Macy's (M), which has ridden pretty high following second-quarter earnings (surprised me).
- Wells Fargo (WFC) strikes me as a name to own not only since the stock has outperformed its peers amid the mini market retrace, but as a pure way to tap in to robust refinance and mortgage demand trends. Evidence for robustness: homebuilder backlogs.
- If we are to believe the positive attributes of the ISM nonmanufacturing number, why are we missing good moves in transports UPS (UPS) and FedEx (FDX) on supposedly "cheaper" valuations? Hmm.
- Waiting for a Harley Davidson (HOG) earnings miss/warning.
- It's a positive indication that homebuilders bounced on the refinance data. This shows there is appetite after recent sector downgrades. Is this a near-term bottom?
- Not sold on the Best Buy (BBY) buyout. It's an eager party, for sure, but potentially one who dumps his stake as a way of preserving family wealth, instead of losing a chunk of it to the mystical powers of Amazon's (AMZN) tech department.
- American Eagle (AEO) on a drop after the dividend payout, as it's this company's holiday to lose among teen-apparel retailers.
- Hewlett Packard (HPQ) is cutting its printer units by 50% in 2013. That's welcome news to the ears of buying teams at office supplies retailers Office Depot (ODP), Staples (SPLS), and Office Max (OMX). Now, that is money saved to delay the inevitable.
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