Retailers of all stripes have fallen back into favor among
investors, and many of them have risen +300% or +400% in the last
year. The profit outlook is surely brightening for the group, but
consumers still remain quite stressed, so these stocks may be
getting ahead of themselves.
That's just what happened with discount homegoods retailer
Tuesday Morning (Nasdaq: TUES)
, which slumped more than -10% on Monday after reporting tepid
fiscal third-quarter results. The stock had risen more than +300%
since early December, but management cooled investors' ardor by
noting that full-year profits may struggle to meet the consensus
forecast. And shares now look pretty pricey at more than 30 times
the high end of management's guided profit range. Despite Monday's
slump, investors should probably stay away from shares of Tuesday
Morning this Tuesday morning.
In light of the strong market rally, investors may also be on guard
against companies rushing to issue new stock. Michigan-based
Capitol Bancorp (
took advantage of recent sharp gains in its stock to raise funds.
And investors quickly voted with their feet against that dilutive
move by pushing shares down nearly -20% in Monday trading. If you
own stocks with fairly weak balance sheets, you should also be
prepared for dilutive capital-raising efforts. Give a close listen
to management commentary on the current quarterly conference call
to glean assurances that such stock-sapping moves aren't planned
for your investment.
Many small banks had a tough go of it in Monday trading. For
example, shares of
PrivateBancorp (Nasdaq: PVTB)
fell by nearly -15% after the Chicago-based lender announced a
stubbornly high loan-loss rate for its first quarter. The bank
stunned investors six months ago when it announced a sharp increase
in delinquent rates. Since then, the bank had spoken of an
improving climate for loans, pushing share prices back up. But that
proved to be a false dawn, as this morning's announcement shows.
Sector laggards also include
Pacific Capital Bancorp (Nasdaq: PCBC)
Cadence Financial (Nasdaq: CADE)
First Midwest Bancorp (Nasdaq: FMBI)
. Even as bank stocks move up off of their lows from 2009, they can
still be quite volatile as the economy sputters back to life. Any
bank reporting stubbornly-high loan delinquencies is not likely to
see a rapid improvement in the quality of their loans. Lesson for
investors: Caveat emptor .
-- David Sterman
Disclosure: David Sterman does not own shares of any security
mentioned in this article.
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