I want to pass along some quick notes as I am travelling back and forth to Philadelphia today.
I neglected to mention yesterday in my discussion of merger & acquisition activity that AT&T (T) is buying Direct TV (DTV). This comes after the Comcast (CMCSA) acquisition of Time Warner Cable (TWC). I expect that consolidation to continue. Next on the auction block will likely be Dish Networks (DISH). It would take a large company to swallow Dish Networks. I would venture a guess that you might see Viacom (VIA) or Fox (FOX) in some deal for or with Dish Networks.
Dick’s Sporting Goods Hit By Weakness in Golf and Hunting
Early today, so far, some retail earnings have hit the tape. They are not pretty. Home Depot (HD) appears to be negatively impacted by a late start to the spring. For what it is worth, my azaleas and rhododendron are first starting to show signs of getting ready to bloom. Normally, that occurs in early May. Dicks Sporting Goods (DKS), a stock I have owned personally and for clients since its initial public offering, is striking out after reporting disappointing results and guidance. The justification for the poor report and guidance is weak golf and hunting segments. Part of that weakness is certainly due to weather, while part is economic. As a longtime owner of the stock, I have seen the company hit by short term headwinds every few years. Urban Outfitter is also looking lower after missing results by a penny.
The Bounce in Small Cap Stocks Continues
In the meantime, the small cap bounce continues. Simply put, the small cap sector got too cheap as momentum traders fled for the safety of value stocks and are now being bought by patient money managers who see bargains. From peak to trough, the Russell 2000 (RUT) declined 10.74% and has since rebounded nearly 3%. So while the damage to some individual stocks may seem disastrous, on a macro basis we just had a correction.
Heading into the day, futures are straddling the closing prices of yesterday. I expect a slightly lower open, followed by meandering and then a positive finish to the session, but nothing to get excited about in either direction.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long DKS and UWM — although positions can change at any time.
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