MercadoLibre, Noodles & Company Both Surge on Earnings Speculations

Wal-Mart leads Dow with 2% gains as impact of Target's data breach less ominous than expected

Feb 26, 2014 at 6:17PM

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Stock prices, very broadly speaking, are driven by only two things: financials and speculation. If, for example, Company X goes public one day having never before recorded a dollar of revenue, then suddenly sells $4 billion worth of pet rocks in its first quarter, Company X shares would skyrocket. But if, shortly thereafter, rumors of accounting fraud at Company X surface, those speculating on the truth of the rumors would drive shares into the ground.

The trouble with speculation in this case, is that it stems from an unreliable source: a rumor. Thankfully, there's such a thing as informed speculation, which is where leading indicators like jobless claims and new home sales come into play. And new home sales in January were dramatically higher than expected, jumping to a 468,000 annual rate, the highest since 2008. Encouraged by this strength but not yet convinced this growth is sustainable, the Dow Jones Industrial Average (DJINDICES:^DJI) added 18 points, or 0.1%, to end at 16,198. 

Wal-Mart Stores (NYSE:WMT) easily finished the day as the Dow's top gainer, tacking on 2% after rival big-box retailer Target waxed optimistic about its 2014 outlook. Wal-Mart shareholders haven't had to deal with the PR nightmare Target has faced after a massive security breach late last year leaked tens of millions of Target customers' credit card numbers. While Target's full-year outlook sent shares 7% higher, it was also good news for Wal-Mart, which can breathe easier now that it knows brick-and-mortar customers haven't sworn off shopping in stores.

Shares of Argentina-based MercadoLibre (NASDAQ:MELI), a leader in Latin American e-commerce, added 5% Wednesday as investors bid up the stock in optimistic anticipation of its quarterly report tomorrow. Sometimes touted as the "Latin American eBay," the $4 billion MercadoLibre is a fraction of eBay's $74 billion e-commerce empire. But MercadoLibre has one thing that eBay lacks: an insane amount of growth. MercadoLibre's grown earnings between 31% and 76% in each of the last four years, while eBay's only managed to grow earnings in two of its past four years.

Similarly, MercadoLibre's $4 billion valuation looms large over the $1.2 billion Noodles & Company (NASDAQ:NDLS), which went public last June. Investors had an insatiable appetite for shares of the fast-casual restaurant as soon as the stock debuted, with the stock rocketing more than 70% in its first day of trading. Today's gains weren't too shabby, either, as anxious shareholders bid Noodles & Company up 7.9% ahead of its quarterly earnings report. Unfortunately for today's speculators, fourth quarter earnings and revenue both disappointed, sending shares right back to where they came from in after-hours trading.

The death of Wal-Mart: The real cash kings changing the face of retail
To learn about two retailers with especially good prospects, take a look at The Motley Fool's special free report: "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail." In it, you'll see how these two cash kings are able to consistently outperform and how they're planning to ride the waves of retail's changing tide. You can access it by clicking here.

John Divine has no position in any stocks mentioned. You can follow him on Twitter, @divinebizkid, and on Motley Fool CAPS, @TMFDivine.

The Motley Fool recommends and owns shares of eBay and MercadoLibre. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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