This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Sozzi: How Nike, YUM Will Get Hurt

This article originally appeared on To read more content like this AND see inside Jim Cramers multi-million dollar portfolio for FREE - Click Here NOW.

A sucker rally, defined: 

"A temporary rise in a specific stock or the market as a whole. A sucker rally occurs with little fundamental information to back the movement in price. This rally may continue just long enough for the "suckers" to get on board, after which the market or specific stock falls."
-- Investopedia

This is the first thing I thought of when watching the Dow rip at the open on Monday. The word on Twitter was that the Crimea vote was widely expected, and that the U.S.' initial sanctions on Russia wouldn't be that intense.

So the market focused on improved industrial production data that are off a low prior month's base and, theoretically, priced into stocks a couple months ago. Gold was bid down, industrial stocks were bought, and all was well, except homebuilders, which were dumped amid industry data that were released ahead of key earnings reports from KB Home (KBH - Get Report) and Lennar (LEN - Get Report).

Back to Russia. The execs I talk to are concerned about this matter, and the issue adds real uncertainty to their international expansion plans. Believe you me, over the next couple of weeks you will hear more talk about the next Cold War. It doesn't take a historian to know that this would be bad news for investors who have portfolios weighted in global companies. My opinion is that investors have gotten too complacent on geopolitical risks and are in for a punch to the face. Russia is frequently mentioned by execs as a fast-growing market that is getting more investment dollars.

Here are two examples of companies that could be hurt by the rising tensions.

  • Nike (NKE - Get Report) has 99 stores in Russia, 57 of them factory stores. In 2013, revenue from Russia rose a cool 28%. By the way, Nike also designed the jerseys for the Russian ice hockey team, and it is supposed to be a major player for World Cup 2018 held in Russia.
  • Yum! Brands' (YUM - Get Report)  KFC segment has 250 restaurants in Russia, and it plans to raise that total to 400 by 2015. In the past two years, KFC Russia has had the highest same-store sales growth rate for the brand globally.

Stock Spotlight: McDonald's and Alibaba

Just a helpful reminder to those who showed McDonald's (MCD - Get Report) shares lovin' after a recent analyst presentation. Not only are there fundamental problems inside the restaurants, there is budding cultural problem that could cause fundamental problems in the future. Here is a tidbit to chew on from the company's recent annual report:

"McDonald's does not believe that any such litigation matter currently being reviewed will have a material adverse effect on its financial condition or results of operations."

Yeah, and eating French fries every single day could help you lose 100 pounds.

On Alibaba, here is the blunt reality as I see it, before bankers pitch you this company over the phone:

You have a company that many investors in the name (outside of the banks running the deal) don't truly understand. China's consumer market could be really murky. Alibaba will have to pay exorbitant prices to acquire companies that may be worthless down the line. Those deals will get more scrutiny when Alibaba becomes a public company.

All of this at a $200 billion valuation. Not my cup of tea.

At the time of publication, Sozzi held no position in the stocks mentioned.

Brian Sozzi is the CEO and Chief Equities Strategist of Belus Capital Advisors. He is responsible for developing and managing an equities portfolio of mid- and large-cap positions, in addition to leading the firm's digital content initiatives. He is also a personal finance columnist for Men's Health magazine.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV


DOW 17,698.18 -77.94 -0.44%
S&P 500 2,059.69 -8.20 -0.40%
NASDAQ 4,880.2280 -20.6570 -0.42%

Our Tweets

Partners Compare Online Brokers

Top Rated Stocks Top Rated Funds Top Rated ETFs