From Wall Street to Main Street
Highlights From the Past Week
Erick J Palacios, MBA Jon S Xynidis
Market Summary
Markets were flat last week, as a host of retailers reported an approximation of the state of the consumer. We spoke last week about volatility and sure enough there were several stocks that behaved as such. We did breach some milestones as the S&P, Nasdaq and Dow Jones either hit intraday highs, touched all time highs or closed at highs. There is a lot of banter whether we "break through" highs or we "retrace." This takes us back to our ongoing discussions of valuations, price to earnings and rates. To give you our view, we still believe that we are fairly valued across the board, certain sectors are a little lofty and the Federal Reserve will increase rates by end of year.
On to the corporate earnings analysis. We mentioned it was retail week, so we'll lead off with Kolh's (KSS). It reported disappointing sales growth in the recent quarter and it was hit with it's biggest single day decline of 13%! Chief Executive Officer, Kevin Mansell blamed lighter traffic as the main driver of shortfall in numbers. Macy's (M) also reported meager sames store sales number in a decline of .7%. Of note was the fact that eventhough management issued guidance of 1.5% to 2% same store sales growth just 2 months or so ago, it lowered expectations on the call to below 2%. Is this is poor management, management misstep or ebb and flow of market?? On the semi-positive, Cisco Systems (CSCO) has had a run up leading to the quarter results and although it hit year over year 5% revenue growth numbers...the stock did nothing. Also earnings per share was .01 cent above expectations but more importantly there were a couple of other tidbits of information on the call that has us looking at this company a little more. On a local front, Harley-Davidson (HOG) fell the most in more than six years as it announced it is trimming its annual shipment outlook and it noted it still sees "aggressive competitive discounting." It closed 7% down for the week and 19% lower year to date.
Parting Thought:
Remember out conversation a little while back about "active management." Well, add Avon (AVP) to the list of things that make you think about who is looking after your investments. A report showed up on EDGAR, the SEC's company filings page that Avon was being acquired by a hoax firm by the name of PTG Capital. Avon was halted from trading three times for volatility and it all ended up as a hoax. The stock traded up 7% during periods of the day when it was allowed to trade again before closing the day even. Very strange situation indeed, but it would have been nice to exit the lagging position on such news if the opportunity presented itself and it was being active managed.
On to the corporate earnings analysis. We mentioned it was retail week, so we'll lead off with Kolh's (KSS). It reported disappointing sales growth in the recent quarter and it was hit with it's biggest single day decline of 13%! Chief Executive Officer, Kevin Mansell blamed lighter traffic as the main driver of shortfall in numbers. Macy's (M) also reported meager sames store sales number in a decline of .7%. Of note was the fact that eventhough management issued guidance of 1.5% to 2% same store sales growth just 2 months or so ago, it lowered expectations on the call to below 2%. Is this is poor management, management misstep or ebb and flow of market?? On the semi-positive, Cisco Systems (CSCO) has had a run up leading to the quarter results and although it hit year over year 5% revenue growth numbers...the stock did nothing. Also earnings per share was .01 cent above expectations but more importantly there were a couple of other tidbits of information on the call that has us looking at this company a little more. On a local front, Harley-Davidson (HOG) fell the most in more than six years as it announced it is trimming its annual shipment outlook and it noted it still sees "aggressive competitive discounting." It closed 7% down for the week and 19% lower year to date.
Parting Thought:
Remember out conversation a little while back about "active management." Well, add Avon (AVP) to the list of things that make you think about who is looking after your investments. A report showed up on EDGAR, the SEC's company filings page that Avon was being acquired by a hoax firm by the name of PTG Capital. Avon was halted from trading three times for volatility and it all ended up as a hoax. The stock traded up 7% during periods of the day when it was allowed to trade again before closing the day even. Very strange situation indeed, but it would have been nice to exit the lagging position on such news if the opportunity presented itself and it was being active managed.
We welcome an opportunity to discuss the above in detail and wish you much success in the rest of your week!
Erick J Palacios, MBA
Financial Advisor
