Welcome back to Close Calls for the week of July 7 through
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
. This was a stock, and a company, that everyone knew (though few
had the brass to say it outright) to be
. 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
, if you are interested.
One of my recent picks, Lumber Liquidators (
), which is a recent enough pick that it is listed in
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 (
), though I'm neutral on Lowes (
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
move even faster than that. Well, they did, but not in the right
So, I was wrong this time. I'm much more frequently
wrong, but I was wrong this time.
Recap, Bull Positions taken July 8, 2014
Lumber Liquidators (
The Hershey Company (
Whole Foods Market (WFM)
Recap, Bear Positions taken July 8, 2014
Lockheed Martin (LMT)
Recap, Bull Positions taken July 11, 2014
Delta Air Lines (DAL)
Micron Technology (MU)
Applied Materials (AMAT)
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