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Retail Casualties
Tweet Share on Facebook August 6, 2008 CommentRetail is on the ropes heading into its most vital months of the year. The outlook could get worse.
A quick roundup of today's bad news:
- Whole Foods slashed earnings forecasts by about half to 13 to 15 cents a share after an absolutely dismal quarter as the crunchy grocer grapples with its troubled buyout of rival Wild Oats and a tough environment for shoppers. (I liked this line from Barron's: You can get a lot of organic things at Whole Foods Market (WFMI). Growth isn't one of them, however.) Shares are off almost 20 percent today.
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Stocks Could Come Back
Tweet Share on Facebook August 5, 2008 CommentIt's rough out there for investors. We're deeply mired in a bear market, and the problems that caused it—housing and credit crises, the slow economy—haven't turned around in a meaningful way yet.
Still, a few folks do see reason to hope that the stock market could end the year with a sizable rally.
Jeff Kleintrop, chief strategist at LPL Financial, says the rest of the summer is going to be frustrating for investors as they face down volatile oil prices (hurricanes? Iran?), the threat of a consumer spending collapse (back-to-school shopping season is looking bad), and the possibility that corporate earnings expectations are still too high. But by the time the end of the year rolls around, he says history points to an S&P 500 that winds up in the green, thanks to a giant fourth-quarter rebound. He writes:
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The Long Healthcare Recovery
Tweet Share on Facebook August 4, 2008 CommentAlmost all year, a good number of analysts have been touting healthcare as a safe bet during the market downturn. They were wrong for a good chunk of 2008, but Merrill Lynch points out today that the sector has quietly crept back into positive territory.
Over the past three months, the S&P 500 healthcare sector has returned 1 percent—a paltry gain but a huge improvement on declines in every other sector in the S&P.
Double-digit earnings growth helps, and while Merrill cops to getting optimistic on the sector a bit early, strategist Brian Belski says the story is intact.
He's calling healthcare a "safety net," and puts it alongside IT and consumer staples companies as sectors that could be set to climb, especially as earnings power in hotter areas like materials and energy begins to cool. Belski compares this round of weakness to the last downturn in healthcare:
While we acknowledge the sector has been "cheap" for quite a long time, we would also note that levels have not been this low since 1994, a period that preceded a major wave of consolidation and renewed growth within the sector.
Belski reminds us that 1994 was the start of something big as a wave of consolidation. In the 12 months following the trough in those stocks, healthcare returned 46.6 percent, more than double the S&P 500. This time around, he says merger activity could come in medical devices, biotech, and life sciences industries.
As for individual names, Merrill likes the manufacturing and innovation side of healthcare including Celgene, Johnson & Johnson, Medtronic, and ThermoFisher.
