It has been a good first month for the markets, with many of the indices at or near multi-year highs. We saw a very good jobs report at the beginning of the month, but let's see if that trend continues or it was just some extra seasonal hiring for the holidays. We've also seen some other decent December economic reports, but some of them were due to expiring tax breaks so companies may have made heavy purchases before the new year to catch a break. All in all, it's been a good start to 2012, and in this election year, a rising market could be good for President Obama's re-election chances.
We are up nicely for the month, but that can change in an instant. We could get bad news out of Europe, we could get some bad earnings report (some big names report this week), and of course, the January jobs data could disappoint. Here are seven January winners that could easily turn into February losers.
|Bank of America (BAC)||$5.56||$7.29||$1.73||31.12%|
|Green Mountain (GMCR)||$44.85||$52.50||$7.65||17.06%|
|Sears Holdings (SHLD)||$31.78||$44.06||$12.28||38.64%|
|First Solar (FSLR)||$33.76||$45.54||$11.78||34.89%|
Apple: Yes, Apple knocked the cover off the ball when it reported earnings this past week. I don't think anyone saw that coming. We all expected a decent number, but even CNBC spent 10 minutes trying to confirm those numbers were real when they initially came out. Apple saw a nice pop after earnings, but was already up a couple of percent going into them. Apple is one of my top picks right now, but there are going to be profits taken at these levels. If you can afford to get in and out of the name frequently, why not sell at $447 if you, like I, believe you can get back in at $425 down the road? It only seems logical. Everyone expects Apple to launch the iPad 3 later in this quarter, but we could get a product announcement in February. Apple historically has traded down when it announces new products. I'm not saying Apple is going to be at $350 by the end of next month, but a healthy pullback seems to be in order.
Bank of America: The financials had a very good month, despite what seemed to be a mixed earnings report. It appears that European fears have lightened a bit, and that got B of A back over the $7 mark. We are now roughly at the price we saw before Warren Buffett announced his investment in the company. Many of these financial names are expected to see huge increases in earnings this year, but revenue numbers are expected to be flat or down. I think earnings expectations will continue to come down, as they have been over time for the past few years. Trading is light, and low interest rates are here to stay for even longer than we thought. The banks are making improvements slowly, but one bad piece of news out of Europe and this stock is back at $6.50. I'm not calling this name a definite short here, but if you are up 30% or so over the past month, it's not a crazy idea to take some money off the table. Taking profits is not a bad idea.
Green Mountain Coffee Roasters: Green Mountain isn't up 30% or more like the rest of these names, other than Apple, but it could be a quick February loser. The company reports its first-quarter earnings Wednesday, February 1, so it could easily become one of the early losers of the month. The company missed revenue by $50 million last quarter, and with expectations for year-over-year revenue growth of 85%, it wouldn't be shocking if it missed again. It was a holiday quarter, and the company does usually do well on the bottom line, but another huge revenue miss will crush this stock, just like it did last quarter. All of January's gains could be wiped out in five minutes after the bell on Wednesday, when this name reports.
Sears Holdings: The retailer had one of the most volatile months in company history in January. After falling under $29 early in the month on speculation that the company was in financial trouble, the stock quickly turned around. Rumors of the company receiving financing, takeover speculation, and short squeezes sent the stock sharply higher throughout the month. The name reached almost $55, a near double in less than three weeks. While the stock has lost a large portion of its gains, closing Friday around $44, it is still up 39% for the month. However, the company is still well off the $80 plus it traded for just months ago, and there are analysts out there with price targets in the single digits. Expect this stock to be volatile in February as well, and if it goes back to trading on fundamentals, it could head back toward those recent lows. The company will report earnings in late February.
Netflix: One of 2011's biggest losers has been one of 2012's biggest winners so far. The company, according to many, is now back from the dead after its recent earnings report, which I don't think was that great. There are still plenty of red flags with the name, which I detail in another article coming out on Monday most likely. However, investors and analysts seem to be pleased so far, with the company nearly up 100% from its late November lows. I think the euphoria could continue in the short term, but one more bad piece of news could do this company in, for good. The company has totally revised its business model, and is focused on a very low margin streaming segment. The long-term viability may not be there if it cannot get content costs down, which seem to be skyrocketing higher.
First Solar: The solar names got off to a good start in January after some numbers revealed that polysilicon prices in December had rebounded and some installation numbers in Europe were above expectations. However, a sharp rally in the names came to a halt mid-month after a German official said that the country might cut subsidies on a monthly basis instead of the normal once or twice a year. That stopped the rally but the names have gone higher since. Everyone still believes in the long-term prospects of the sector, but there is a bit of oversupply right now. I think we are closer to a bottom now than we were a few months ago, but I'm not quite convinced we are there yet. Many of the smaller solar names, including most of the Chinese ones, are forecasted to lose large amounts of money in 2012. These are high debt companies and continued losses will have some serious impacts on their financial flexibility. We'll see how things stand when they report later in February.
Lululemon: Shares of the Canadian apparel maker are currently close to 52-week and all-time highs that were set on Thursday. It was a great month for the name. Initially, the company was put on Goldman Sachs' conviction buy list, which sent the shares up 10%. Then, the company pre-announced that the quarter was going well, sending shares even higher. Apparently, it sold a lot of the extra inventory it had, which was a big concern in the prior quarter. The valuation is a bit high right now, trading at 40 times fiscal 2013 (ending Jan. 2013) earnings, so the shorts may come back in here soon. Like Apple, this is another great name to be in for the long run, but a healthy pullback would be nice. It might be worth taking some profits here close to $65 and getting back in at $55 to $60 if you can.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.