It was a rough day for the markets as investors are starting to
get a sense corporate America is struggling to keep revenues
growing. We continue to see a pattern of EPS beats and revenue
shortfalls littered across the earnings landscape. Companies are
also getting leaner, as evidenced by this morning's job cut
announcement from DuPont (
DD
).
Speaking of DuPont, the company's results disappointed
investors. Other names seeing investor selling included United
Technologies (
UTX
), Western Digital (
WDC
), and Reynolds American (
RAI
). We have commented recently on the tobacco sector and the recent
weakness hitting some of the key names. Our take is the businesses
aren't revenue growth-oriented so much as they are huge generators
of cash. In a yield-starved investment environment, the sector
should still be on investors' radars during any significant
pullbacks.
It wasn't all red on the screen today, as several names bucked
the overall selling, courtesy of earnings beats primarily. Shares
of Whirlpool (
WHR
), Harley-Davidson (
HOG
), United Parcel Service (
UPS
), and Coach (
COH
) all gained on their earnings news/announcements. Coach also
announced a large share buyback program that is supposed to run
till 2015. As we always say, share buybacks are not the best way
we'd like to see cash deployed to increase shareholder value.
"Eat It"
Coaching Little League baseball offers quite the life lessons,
especially when havoc begins to occur on the field. One of the
things we try to do as coaches is limit the mistakes made on any
one particular play. Often times, if you have ever been to a little
league game, you will hear coaches yell out the phrase "eat it".
This basically hints to the player with the ball to not throw it.
Why this happens is that when the ball gets thrown around too often
during one play in a little league game, not too many good things
result.
This phrase had me thinking about how traders/investors should
sometimes consider "eating it," meaning to stop putting good money
after bad. I have known my share of investors hurt badly when
doubling and tripling down on a stock that has gone against them.
Even worse sometimes, they will just let losing positions languish
for months or even years. The though is, "I could have sold it
higher than where it is currently, so why sell it here?".
Eventually the drip lower is completely ignored and the stock is
left alone to sit in a portfolio, all the while the capital that
should have been salvaged could have been put to better use in a
much better stock idea.
When you think about it, "eating it" is an early form of
discipline that we teach kids. The lesson is to not compound one
mistake with another, and then another. I wish some investors could
adopt this mantra as part of their own wealth-building strategy in
this ever-changing investment landscape.
Income, Income, Income
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. Also, if we see the market putting in what looks like a decent
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