Dow Hits Another Record, but Lumber Liquidators and Fresh Market Tumble
Nov 22nd 2013 10:00PM
Updated Nov 22nd 2013 10:02PM
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.
You wouldn't be remiss to think a rising stock market is now one of life's guarantees alongside death and taxes. Week after week this year, stocks have moved inexorably higher, despite a weak economy, the government's recurring inability to make the most basic decisions, and federal spending cuts. Today, the S&P 500 closed above 1,800 for the first time today, and the Dow Jones Industrial Average moved further into uncharted territory north of 16,000, both scoring their seventh straight weekly gains. Even the Nasdaq is less than a percentage point from hitting 4,000, after gaining more than 30% this year. Yesterday's enthusiasm about Janet Yellen's preliminary confirmation and a strong unemployment claims report seemed to carry over to today, lifting the S&P 500 0.5% and the Dow up 0.3%.
Despite the broad market gains, not every stock was a winner today. Shares of Lumber Liquidators were getting taken to the woodshed, falling 12% after Whitney Tilson, head of the Kase Capital Management hedge fund, announced a short position in the high-flying wood-flooring specialist. At an investor conference, Tilson noted a government investigation into potentially illegal timber imports by Lumber Liquidators, and suggested the company's gross margins, which have improved to better than 40% lately, were too good to be true. The hedge fund manager also cited a report from the non-profit Environmental Investigative Agency that said Lumber Liquidators' purchases "have fueled rampant illegal logging in Eastern Russia." Shares of the flooring retailer had more than doubled this year before today's drop, riding the broader housing recovery.
The Fresh Market also took one on the chin, falling 19% after an across-the-board poor quarterly earnings report. The Whole Foods rival reported flat per-share profit growth at $0.23, missing estimates of $0.26. Sales also fell short, growing 13% to $364 million, and same-store sales improved only modestly by 3.1%. Management cited "increasingly challenging economic conditions" for the rough quarter, but the company's outlook also came up weak as the Fresh Market guided for full-year EPS of $1.42.-$1.47, below the consensus at $1.53. For a company that calls itself "high growth" and a stock that's priced similarly, Fresh Market will need bottom-line growth above 10% to keep shares from falling even more.
Thinking about rebalancing?
The market stormed out to huge gains across 2013, leaving investors on the sidelines burned. However, opportunistic investors can still find huge winners. The Motley Fool's chief investment officer has just hand-picked one such opportunity in our new report: "The Motley Fool's Top Stock for 2014." To find out which stock it is and read our in-depth report, simply click here. It's free!
The article Dow Hits Another Record, but Lumber Liquidators and Fresh Market Tumble originally appeared on Fool.com.Fool contributor Jeremy Bowman has no position in any stocks mentioned. The Motley Fool recommends The Fresh Market. It recommends and owns shares of Lumber Liquidators. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.