I’m literally dumbfounded by Apple’s (AAPL) 12% gains from Monday’s lows on seemingly no new news. Sentiment around their new products was low, and now they are high. I thought the stock was a sale at $105 last week, so at $115 I am not about to change my mind. But this raises the question, what are some other premium brand stocks whose stocks are suffering from unwarranted negative sentiment, or merely misunderstood?
Disney (DIS) possibly. It’s down 12% on the year, down 24% from its 52 week highs made last November and up only 7% from its 52 week lows made in February.
When you look at the price action of the stock since their August 9th fiscal Q3 earnings report, you would think ESPN is causing TV batteries to explode, Iron Man finally died and Rey is simply Luke’s daughter:
$90 seems like a psychological level. It’s a nice round number and it’s the panic bottom from the Aug 24th, 2015 flash crash. But if you are a “buy it for the kids college fund” sort, and looking to dollar cost average, the idea of nailing the bottom with a long time horizon will be challenging. But it could make sense to wade in now with a quarter position, leaving ammo for a quarter with an 8 handle, and then you know the drill:
Another premium brand that’s suddenly found poor sentiment and poor price action is Starbucks (SBUX)). The stock is down 10% on the year, down 15% from its 52 week highs, and up only a few percent from its 52 week lows made in February:
And then there is Nike (NKE), down 11% on the year, down 19% from its 52 week, and all time highs made in in late December, and up 8% from its 52 week lows made in late June:
I don’t highlight these three stocks poor performance with any intent to extrapolate to the broad market. If anything there is an easy argument to be made that the rally has broadened out, that we are less reliant on stocks like AAPL, DIS, NKE & SBUX that did a good bit of the heavy lifting in earlier stages of the bull run. Could these these stocks follow a similar pattern to AAPL? Sure, but there is obviously a few big difference when you get past the premium brand/product thingy. Valuation and expected growth.
DIS, for the first time in a while, trades below a market multiple. In my mind it has the best chance of the group to pull an AAPL, while NKE & SBUX would likely need some sort of fundamental inflection point.
One more thing though about prior market leaders. Keep an eye on Costco (COST) and The Home Depot (HD) two stocks thought to be somewhat impervious to cracks in consumer spending. COST has declined 10% in the last month from 52 week highs, down 6% on the year, but seemingly found a little support at the nice round number of $150:
And HD, down 9% from its 52 week and all time highs made in early August, is trying to hold support at $125: