Close calls: Market lazy, investors woozy

By
A A A

Welcome back to Close Calls for the week of July 7 through July 11.

The market was a little funny this week. It was like all the usual urgency was just… gone. This happens sometimes after a holiday, as if the market is hung over, or when it is way too hot, as if the market is suffering a heat stroke. In any case, the market was just not able to find any real direction this week, and I don't doubt that some combination of the afformentioned states is to blame.

We did, however, get to witness something truly anomalous. CYNK rose from mere pennies until it reached a market cap above $6 billion . This was a stock, and a company, that everyone knew (though few had the brass to say it outright) to be worthless . It looks like a case where a few crooks should have been content to walk away with millions, but grabbed instead for billions. It is all but certain now that the perpetrators will be caught and punished.

But how was it even possible?

Paul Santos does a wonderful job of explaining it, here on Seeking Alpha , if you are interested.

Reappraisal

One of my recent picks, Lumber Liquidators ( LL ), which is a recent enough pick that it is listed in this week's weekly trade recap, turned very sour, very quickly. LL stock lost 21.5% of its value on Thursday, after the company reported lower than expected earnings for its 2014 second quarter. The company even went out of its way to specify that weather was not a factor in its poor performance, as if it were trying to rub its own nose in its failure. It also warned that the rest of the year probably wouldn't be a rose garden either.

Given all the recent strength we have seen in the job market, I don't believe this company's miss is an indication that consumers are spending less on home improvement; I remain bullish on Home Depot ( HD ), though I'm neutral on Lowes ( LOW ).

This price drop has all the hallmarks of a self-inflicted injury, misery being one of them. The company added 13 stores during the quarter, a serious miscalculation given that during the same quarter, comparable-store sales fell by a hair-raising 7.1%. It has now been two brutal quarters in a row for Lumber Liquidators, and my faith in the company and its management is gone. I now say LL is a sell--you can always change ponies and come back stronger another day. On Monday I wrote that the stock might trade above $90 per share by the end of the year, but that things might move even faster than that. Well, they did, but not in the right direction.

So, I was wrong this time. I'm much more frequently not wrong, but I was wrong this time.

Recap, Bull Positions taken July 8, 2014

Company                                                       Initial Price

Lumber Liquidators ( LL )                                             $74.99

The Hershey Company ( HSY )                                     $97.37

PetSmart ( PETM )                                                        $68.10

Whole Foods Market (WFM)                                     $39.34

Recap, Bear Positions taken July 8, 2014

Company                                                       Initial Price

Lockheed Martin (LMT)                                              $157.97

Recap, Bull Positions taken July 11, 2014

Company                                                       Initial Price

Alcoa (AA)                                                                  $15.72

Delta Air Lines (DAL)                                                $36.98

Micron Technology (MU)                                            $32.78

Applied Materials (AMAT)                                         $22.81

Garmin (GRMN)                                                         $57.07


This article was originally published on MarketIntelligeneCenter.com



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Technology

Referenced Stocks: LL , HD , LOW , HSY , PETM

Market Intelligence Center

Market Intelligence Center

More from Market Intelligence Center:

Related Videos

3 Defensive Fund Picks
3 Defensive Fund Picks              

Stocks

Referenced

Most Active by Volume

91,735,706
  • $75.905 ▲ 6.47%
45,675,822
  • $8.2874 ▲ 7.91%
35,292,632
  • $36.10 ▲ 4.00%
33,571,092
  • $17.935 ▲ 0.87%
30,822,399
  • $35.47 ▼ 1.14%
28,885,702
  • $96.96 ▼ 0.24%
28,872,901
  • $3.435 ▼ 0.72%
27,844,434
  • $15.58 ▲ 0.39%
As of 7/24/2014, 02:20 PM