Don't Hit the Panic Button Yet
By Eric Gillin
Staff Reporter
3/14/01 11:17 AM ET
The early-morning buzz had all the flavor of moldy cheese. Europe blows up, Japan is ailing and the U.S. stock market futures had everyone reaching for the panic button.
But it hasn't unfolded according to script. At midmorning, the major measures are certainly down, but not down in the way the early indicators threatened. Instead of plunging to another eye-popping loss, it seems that things have already started to stabilize. Things remain fragile, but the anticipated bloodbath has yet to unfold.
Why? According to trading desks, a big hedge fund is moving or has moved a big basket of European stocks. Billions. In order to move that kind of product, institutions bid prices lower so as to find buyers and increase liquidity. This one-time event would explain why the markets whooshed lower and then started bouncing higher.
If that is what's going on -- and it's not something darker and more fundamental like a collapsing European or Japanese bank -- we've seen it before. Almost one year ago, money runner extraordinaire George Soros decided to exit the market and he took a lot of the Nasdaq Composite and Dow Jones with him. The Nasdaq dropped 9%, or 355 points. The Dow fell 616 points. And people screamed.
As market watchers grasp at straws, trying to figure out what triggered this selloff -- the selloff could be over. That was one of the major frustrations with that April 14 plummet. A lot of money left on that day, but people couldn't figure out where the ruckus came from.
And what glitters best against a black velvet nightmare? Diamonds.
Here's an in-depth look at five stocks that might prove countertrend today. Some because of news, many because brokerage firms are pushing them hard as go-to recommendations in the current confusion. A bewildered market can present opportunity.
Last night, Kohl's (KSS:NYSE - news), the Midwestern department store chain, announced fourth-quarter earnings that were 48% higher than last year's numbers, surprising the professionals that watch this down-home discounter every day. Sales at stores that were open at least one year grew by a whopping 12.5%, topping the 11% estimate expected by many people. And when you factor in the 61 stores Kohl's built all over the U.S. last year -- that's a 38% ramp up in sales for the fourth quarter.
Simply put, the company came in with 52 cents a share this quarter, blasting last year's 36 cents and beating the 50-cent analyst estimate. Those are huge numbers from a brand that many investors know for its Nikes and Levi's. And the company has given investors something to believe in, announcing that it will be going national over the next three to four years, opening 60 stores in 2001 and 70 stores in 2002, before moving into California and the Southwest in 2003.
In a retail environment that had a lousy Christmas and a lot of bad news from specialty retailers like the Gap, Kohl's has dropped more than $10 from a 52-week-high set a month ago. Welp, investors looking for a growth story certainly liked what they read about Kohl's. The stock is rallying this morning, thanks to a push from Piper Jaffrey, the Minnesota-based brokerage firm that is nearby the Wisconsin-based company.
Investors turned to another familiar face, Anheuser-Busch (BUD:NYSE - news), after August Busch III got a $3 million bonus for his great work in the past year. Beer sales, in total volume, are stronger than expected and the company, not far from 52-week-highs, was up as well. Back in the beginning of February, Busch reported a 10% gain in fourth-quarter profits. In an environment filled with slowing earnings, the company also reaffirmed that earnings would grow by at least 12% in 2001, giving investors a feeling of calm lacking in the crazy world of technology. BUD is barely higher in the morning.
That said, not all technology names were kaput today. SCI Systems (SCI:NYSE - news) was upgraded by Thomas Weisel Partners, a brokerage firm, this morning after the company bought two manufacturing plants from Nokia. This is quite the encouraging sign for the contract equipment manufacturer, which makes its money by making a wide array for technology for other companies. In a struggling environment where money is tight, these guys actually went out and bought something. That sent a positive sign to investors and analysts alike who were looking for things to buy today. SCI is slightly higher this morning.
Mylan Laboratories (MYL:NYSE - news), a small generic drugmaker, was a winner, too. Last night, the David-sized company won a critical ruling against Goliath pharmaceutical Bristol-Myers. Mylan can now go out and make a cheaper knock-off of BuSpar, Bristol-Myers' anti-anxiety drug. Judging from recent market activity, many investors are probably real familiar with anti-anxiety drugs. And with a ton of exclusive patents on major drugs about to expire in the next few years, this is quite a good sign for generic drugmakers as a whole. Mylan is off modestly this morning.
Last but not least, Fannie Mae (FNM:NYSE - news) hit $74.70 as investors looked at last night's headlines. America's largest mortgage finance company announced that 2001 would be a good one and actually raised its profit estimate for the year. The company said that more and more people are refinancing because interest rates dropped lower, a sign that the Fed's cut worked well for someone at least. Earnings per share are now expected to grow by 14.9% from the previous estimate of 13.6%.
And J.P. Morgan has upgraded the stock into the teeth of this storm. Another plus for investors looking for the countertrend. |
