The Dow, Nasdaq and the S&P 500 stock index soared to record highs this month, fueled by a confluence of Friday’s job report that showed an increase in U.S. wages, a spike in energy prices, a Fed meeting that allayed worry it would raise interest rates and investor optimism that President Donald Trump will improve the economy.
Markets this trading week completed a two-month run since the U.S. election on Nov. 8 that has included a string of new records. In the past month, Nasdaq rose 3.4%, reaching a record peak Thursday; the S&P 500 gained 2.59% to a new intraday high Friday; and the Dow climbed 3.8%, coming within one point of 20,000 for the first time Friday.
With investors so ebullient, only 80 of the S&P 500 large-cap companies’ stock prices have declined in the past month, and none by more than 9%. With Obamacare, and Medicare and Medicaid funding targeted by House Republicans, the health care sector has performed the worst of all S&P 500 sectors. It crept up from a one-year decline of 2.35% on Thursday to a 0.3% gain on Friday, compared to a 12.7% gain in the S&P 500.
Investors hunting for lower prices can look beyond health care constituents, though. Only one of the six stocks with steepest declines hails from the sector. An article posted yesterday covered the top three on the list: Humana (HUM), Las Vegas Sands (LVS) and Aetna (AET). The next three are: VF Corp. (VFC), Luxottica Group SpA (LUX) and Target Corp. (TGT).
VF Corp. stock declined 6.2% in the last month, from $56.68 to $53.18. Its closing price on Friday drifted to near a 52-week low of $51.75. VF Corp. makes apparel and footwear with recognizable brands like The North Face, Vans and Nautica.
Both VF Corp. and Luxottica were hit by the market’s selloff of retail stocks this week. Weaker than expected holiday sales dropped bellwethers Macy’s (M) and Kohl’s (KSS) stocks by double digits on Thursday, contributing to the 3% tumble in the SPDR S&P Retail ETF (XRT).
VF Corp. has also struggled with declining sales this year. In the third quarter, company revenue declined 1% year over year, as sales of its North Face brand and of its Jeanswear, Imagewear and Sportswear segments all stumbled. For the full year, VF Corp. expects positive revenue in its Outdoor & Action Sports, Jeanswear and Direct-to-Consumer segments, and has lowered its projections for operating margins and EPS.
VF Corp. has five-year growth rates of 10% for revenue, 12.3% for EBITDA and 7.8% for book value. It has a P/E ratio of 20.14. Guru investors with the largest holdings are Diamond Hill Capital, Jeremy Grantham and Ray Dalio.
Luxottica Group’s stock declined 5.5%, from $53.74 to $50.85. The company, with a broad international and emerging market footprint, owns eyewear brands like Ray-Ban and Oakley, and licenses luxury brands. It complements its glasses business by owning retail eyewear stores that sell them, like LensCrafters and Sunglass Hut.
Luxottica has five-year revenue growth rates of 7.1% for revenue, 10.9% for EBITDA and 9.8% for book value. Its P/E is 24.1. Only Jim Simons and Ken Fisher own the stock.
Shares of Target, the retailer of general merchandise, retreated to their election-day levels with a 6.9% drop in the past month, from $76.78 to $71.44.
In the third quarter, Target’s sales declined 0.2%, and GAAP EPS increased 39.7% to $1.06 year over year, topping expectations. The company raised its guidance for comparable sales in the fourth quarter with the crucial holiday season to a range from a 1% decline to 1% growth, and GAAP EPS from continuing operations I a range of $1.55 to $1.75.
Over the longer term, Target’s operating margins have declined at an annual rate of 4.3% in the past five years. Per-share revenue growth also slowed down in the past 12 months, and its P/B ratio has come close to a 10-year high.
The company’s five-year annual growth rates are 4.3% for revenue and 0.9% for EBITDA. Its book value declined at a rate of 3.6%. Target has a P/E near a three-year low at 13.1. Guru investors with the largest positions in Target are Mairs and Power; NQW Managers; and Barrow, Hanley, Mewhinney & Strauss.
Read Part 2 of this story here.
