|Written by Rob Goldman|
Today is Groundhog Day but more important, the month of January is over, which probably is a good thing, considering its lousy performance. Still, for all of the doomsayers, we outline how over the past 10 years, a down January is usually good for investors and stocks for the balance of the year.
Now that the Patriots have won another Super Bowl, what does the Super Bowl indicator tell us—and is it right this year? We think it is wrong. See why that is the case in this week's Guide.
Finally, we introduce a stock that delivers goods, solid results and stock performance---and has done it like clockwork during this time of year for the past 3 years. With just-released results ahead of estimates, see why this stock that women love could be a winner for your portfolio over the near term.
WILL FEBRUARY BE BETTER FOR STOCKS?
Yes, January was a terrible start to the year and the problems, as outlined below, are solvable with positive (albeit muted) returns still likely in the offing, despite doom and gloom fear-mongers. Before we get into the specifics, let's lift the hood on the numbers.
The S&P 500 Index January performance wasn't just bad relative to typical expectations but awful going back to 1950. There have been only 26 down periods in January, as compared with 39 up periods, with an average return of a positive 0.94%.
As for returns over the last 5 years, this is the second consecutive down month for the index in January and the third drop since 2010 when it declined by 3.82%. Believe it or not that was worse than the 3.7% drop in 2015, and the 3.4% fall in 2014, but paled in comparison to the 2008-2009 debacles..
Does a down January portend a bad year? Not if recent history is any guide. Check out these figures:
2014: January decline of (3.4%), year ended up 13.8%
2010: January decline of (3.8%), year ended up 14.8%
2009: January decline of (8.5%), year ended up 27.1%
2008: January decline of (6.1%), year ended down 37.2%
2005: January decline of (2.5%), year ended up 4.8%
For those of you that follow the Super Bowl Indicator, which states that the market performs better when non-AFL related teams win, you might be a bit nervous after yesterday's game, since the Patriots were originally an AFL team.
Stock Delivers Returns
The reality is that in the previous three New England Patriots Super Bowl wins, the market returns were mixed. In 2002, the S&P 500 dropped by 23.4%, in 2004 and 2005 the index rose by 9% and 3%, respectively. We will give 2002 a pass considering it was the post-9/11 year and go back to our thesis since late 2014 that 2015 will be an up year but with single digit returns. In the near term, it appears that the major indices are range-bound, as earnings growth, GDP growth, valuation, and issues abroad led by oil and currency changes will remain front and center. Still, there are some real deals to be had for stock pickers, let alone opportunities to play the ranges for those inclined to trade on a short term basis.
A stock we have had success with timing in the past is 1-800 Flowers, Inc. (NASDAQ—FLWS—$7.89). 1-800-FLOWERS.COM, Inc. operates a florist and gift shop in the United States. The company operates in three segments: Consumer Floral, Gourmet Food and Gift Baskets, and BloomNet Wire Service. It offers various products, such as fresh-cut flowers, floral and fruit arrangements and plants, gifts, popcorn, gourmet foods and gift baskets, cookies, chocolates, candies, wine, candles, balloons, and plush stuffed animals. As of June 29, 2014, the company operates one floral retail store in New York and eight floral retail stores in the Mid-West. In addition, it has 196 floral franchised stores located in the United States. The company was founded in 1976.
For the past three years, the stock has enjoyed a nice run from the time it releases its Q2 fiscal results in Jan/Feb through April, with solid accumulation occurring just before the important Valentine's Day holiday. Well, here we are again. Early this morning, FLWS released results slightly ahead of expectations with the reiteration of previous guidance, going forward, despite a devastating factory fire in November. Results can be found here: http://finance.yahoo.com/news/1-800-flowers-com-inc-120000481.html
Trading current Wall Street EPS estimates, FLWS appears primed to approach the $10 level, in our view. Moreover, with lower gas prices, its delivery costs may enjoy a reduction this quarter. Given the strong Q2 performance, solid guidance ahead, historical performance this time of year and the lower costs, FLWS could be a great short term play.
Have a great day!
Launched in May 2010, The Goldman Guide is a free weekly publication of Goldman Small Cap Research and is written by Founder Rob Goldman with contributions from the GSCR contributor team. This non-sponsored investment newsletter seeks to provide investors with market, economic, political and equity-specific insights via an action-oriented, straight to the point approach. No companies mentioned in this newsletter are current sponsored research clients of the Company or its parent, unless noted, With rare exceptions, all companies or investment ideas mentioned in this publication are publicly traded stocks listed either on the NYSE or the NASDAQ. Goldman Small Cap Research members and contributors' bios, certifications, and experience can be found on our website: www.goldmanresearch.com.
This newsletter was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces non-sponsored and sponsored (paid) investment research. Goldman Small Cap Research is not affiliated in any way with Goldman Sachs & Co.
The Firm's non-sponsored research publications category, Select Research, reflects the Firm's internally generated stock ideas, along with economic, industry and market outlooks. In virtually all cases, stocks mentioned in Select Research offerings are listed on the NYSE or the NASDAQ. Publications in this category include the weekly newsletter The Goldman Guide, daily Market Monitor blogs, Special Reports, and premium products such as The 30-30 Report. Goldman Small Cap Research analysts are neither long nor short stocks mentioned in this newsletter.
Opportunity Research reports, updates and Microcap Hot Topics articles reflect sponsored (paid) research but can also include non-sponsored micro cap research ideas that typically carry greater risks than those stocks covered in Select Research category. It is important to note that while we may track performance separately, we utilize many of the same coverage criteria in determining coverage of all stocks in both research formats. Please view the company's individual disclosures for each engagement, which can be found in company-specific Opportunity Research reports, updates and articles.
Goldman Small Cap Research has not been compensated for any content in this issue.
All information contained in this newsletter and in our reports were provided by the companies mentioned via news releases, filings, and their websites or generated from our own due diligence. Economic, market data and charts are provided by a variety of sources and are cited upon publication. Stock performance data is derived from Yahoo! Finance. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence.
The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, other firms, or other financial news outlets. Goldman Small Cap Research relied solely upon information provided by companies through filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Goldman Small Cap Research report, update, article, blog, note, or newsletter is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed. This newsletter does not take into account the investment objectives, financial situation, or particular needs of any particular person. This newsletter does not provide all information material to an investor's decision about whether or not to make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with the FINRA or with any state securities regulatory authority.
ALL INFORMATION IN THIS REPORT OR NEWSLETTER IS PROVIDED "AS IS" WITHOUT WARRANTIES, EXPRESSED OR IMPLIED, OR REPRESENTATIONS OF ANY KIND. TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE FOR THE QUALITY, ACCURACY, COMPLETENESS, RELIABILITY OR TIMELINESS OF THIS INFORMATION, OR FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF THIS INFORMATION BY YOU OR ANYONE ELSE (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES, TRADING LOSSES, AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS INFORMATION). TO THE FULLEST EXTENT PERMITTED BY LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE TO YOU OR ANYONE ELSE UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY, PRODUCTS LIABILITY, OR OTHER THEORY WITH RESPECT TO THIS PRESENTATION OF INFORMATION.
For more information, visit our Disclaimer: www.goldmanresearch.com.