Best Buy Plummets, Home Depot Shines on Earnings

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Earnings were in the spotlight on the stock market today, pulling indexes in opposing directions as investors tried to read between the lines to decipher the health of the economy. The Dow Jones Industrial Average broke a four-day win streak Tuesday, fueling a growing faction of the financial media that claims stocks may be approaching a peak. While some pockets of the market may indeed trade at heady valuations, the Dow's P/E multiple sits at 17.8, a number not likely to attract value investors but not indicative of unbounded, '90s-esque optimism, either. The Dow lost about 9 points, or less than 0.1%, to end at 15,967 today. 

Home Depot reported earnings today and ended as one of the top-performing blue chips, adding 0.9% after reporting third-quarter results. The home improvement retailer continues to be the top player in its industry, beating both top- and bottom-line expectations. Home Depot investors, whether they intend to or not, are betting on continued growth in the real estate market, and this year that's been a wise bet. Home prices are rising secularly across the country, and with the Federal Reserve likely to keep rates low into 2014, real estate is a smart area to have exposure to. 


Elsewhere in consumer services, teen apparel retailer Aeropostale jumped 3.9% as retailers' favorite day of the year, Black Friday, is now only 10 days away. Aeropostale stock has plummeted in the past six months, falling more than 40% in that time. Attempting to divine the reason for the sell-off, the catalyst is clear: In a brand-centric industry, Aeropostale cannot command the elusive and lucrative traits of pricing power and brand loyalty. Indeed, as my colleague Nicole Seghetti noted, the company's same-store sales fell more than 10% last quarter. Unfortunately for investors, today's run came on light volume and little news.

Lastly, shares of consumer electronics powerhouse Best Buy tumbled 11% Tuesday after announcing quarterly results of its own. Though the company's quarter in and of itself actually impressed Wall Street, fourth quarter projections failed to win investors' hearts. Best Buy is joining a slew of competitors in the nonsensical fad to start Black Friday deals next Thursday, on Thanksgiving. The company's CEO essentially admitted today that its margins would take a severe blow in the fourth quarter as Best Buy gets medieval on some deals in order to win customers.

The death of Wal-Mart: the real cash kings changing the face of retail
To learn about two retailers with especially good prospects, take a look at The Motley Fool's special free report: "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail." In it, you'll see how these two cash kings are able to consistently outperform and how they're planning to ride the waves of retail's changing tide. You can access it by clicking here.

The article Best Buy Plummets, Home Depot Shines on Earnings originally appeared on Fool.com.

Fool contributor John Divine has no position in any stocks mentioned.  You can follow him on Twitter, @divinebizkid , and on Motley Fool CAPS, @TMFDivine . The Motley Fool recommends Home Depot. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Learn about investing from the comfort of your own home.

Portfolio Basics

Take the first steps to building your portfolio.

View Course »

Investment Strategies

Learn the strategies you need to build a winning portfolio

View Course »

Add a Comment

*0 / 3000 Character Maximum