WASHINGTON, July 24, 2017 – As we noted in our companion column, aside from roller-coaster earnings news that took Alphabet (Google, symbol: GOOGL) up and then way down after the Monday closing bell, markets were mixed Monday, after an uncertain options-expiration Friday gave us a similar market move.
The daily antics of market averages, sectors and individual stocks have gotten so toppy that stocks’ recent, nervous-tic-style movements to and fro are adding more confusion than clarity for traders and investors alike. Buy now and you’re afraid you’ll be overpaying before a market crash. Sell now, and you’re worried you’ll be leaving too much on the table. It’s that time of year. Maybe we should all go to the beach and forget this market nonsense for now, just like the rich guys do. Except that many of us can’t afford it.
We finally decided to part, at least for now, with our winning position in Washington, D.C.-based management, finance and vulture capital firm Carlyle Group (CG). The stock, like many others in the financial sector lately, has been looking robust but toppy, so we decided that any attempt to beat our surprising profit of 22 percent and change was an increasingly foolish risk. So we took it.
If Carlyle, and that other similar firm that we like, Blackstone Group (BX) – whose stock we sold earlier this month – take their own vacation on the downside over the next few weeks, we’ll be happy to get back in both of them. They’ve worked twice for us this year, and maybe the third time will be the real charm.
On the other hand, since we were approaching a 40 percent cash position due to recent selling of various positions in our portfolios, we decided to take small chances by adding to our small position in Home Depot (HD) today as that stock sank again, though we held off on doing the same for an equally small starter position in cut-price retailer Dollar Tree (DLTR). The latter also took a hit today.
Retailers, in the main, have been suffering since last week’s shocking announcement that the hydra-headed retail monster known as Amazon.com (AMZN) was following its proposed Whole Foods (WFM) acquisition by cutting a deal with struggling Sears Holdings (SHLD) to effectively add sales and fulfillment of the Kenmore line of major appliances to Amazon’s online store.
That news immediately gobsmacked any brick and mortar stores that were wholly or partially peddling the same merchandise, most notably Home Depot, Lowe’s (LOW) and Best Buy (BBY).
After Home Depot took a big price drop last week like the others, we bought a few of these pricey shares, and we doubled the position today after the company took yet another hit, bringing its price (give or take $144.50 per share for now) into an attractive range for us.
Word from analysts is yes, HD could take some sort of hit due to this new Amazon-Sears-Kenmore tie-up. But, as appliances only count for about 7-8 percent of HD’s sales overall, it’s entirely possible and, in fact, probable that the current selling in its shares is already overdone.
Although Dollar Tree does not sell appliances, it, too, got caught up in the retail panic-selling wave. DLTR has a few other problems, most notably incorporating more underperforming stores from its recent acquisition of Family Dollar and straightening them out via Dollar Tree’s more successful format.
In any event, as long as consumers continue to deal with essentially stagnant wages, dollar stores in general, including the aggressive Dollar General (DG) remain a good buy in our opinion whenever they take a significant panic hit.
We also picked up a partial position in a stock we have made money on in the past: Valero (VLO), the oil-refining giant. VLO pays a fat dividend, seems stuck for now in the mid-to-upper $60 range, but will likely do better than refiners or frackers themselves, at least over the next few months. If shares experience weakness, we may buy more. As for now, we’ll stick to our usual style of averaging down on any weakness in companies we like.