Will Staples, Peabody Energy, and Urban Outfitters Hold the S&P 500 Back?

These stocks weighed on the S&P 500 last week.

May 25, 2014 at 11:33AM

Record highs have come once again for the S&P 500 (SNPINDEX:^GSPC), which finished above the 1,900 level on Friday and returned to unparalleled heights. In general, the market seemed to react positively to all the favorable economic news that has driven the prospects for the U.S. forward recently. But it would be a huge mistake to assume that every stock has performed well, as Staples (NASDAQ:SPLS), Peabody Energy (NYSE:BTU), and Urban Outfitters (NASDAQ:URBN) were among the worst performers in the S&P 500 last week and held back the index from posting even more impressive gains.

Spls Small

Staples plunged 12% after the office-supply retailer's quarterly results were even worse than investors had already expected. A 3% drop in overall revenue wasn't all that surprising, given the drop in overall store traffic that led to a 4% decline in same-store sales. But what many shareholders weren't prepared for was the extent to which Staples had to cut prices and offer promotions just to retain that reduced level of traffic in its stores. Moreover, poor guidance for the current quarter eliminated one hope that Staples shareholders had had, making it impossible to blame winter weather for the ongoing struggles of the retailer going forward. Restructuring efforts will be necessary in order for Staples to rebound, but it's far from certain that even those moves will be enough to make a difference given the deteriorating conditions in the industry.

Source: Peabody Energy.

Peabody Energy fell 8% amid general uncertainty about the future of the coal-mining industry. Peabody has a number of advantages compared to its peers, as its international coal resources give it geographical proximity to the key Asian market. But after some optimism in recent months that the coal market could finally start to turn around on an increase in demand from China and other heavy coal users, this week brought concerns that the recent bullishness came more from inventory restocking among those users rather than lasting higher demand. Higher natural gas prices could support thermal coal producers like Peabody in the future, but it'll take more than just a bottoming process to send coal stocks markedly higher.

Urban Outfitters dropped 10% in a terrible week for teen retail. Urban Outfitters started the week on a negative note, with its namesake stores posting an ugly 12% decline in same-store sales, offsetting substantial gains from its Free People and Anthropologie stores. Later in the week, some of Urban Outfitters' rivals fared even worse, suggesting a true changing of the guard in the teen-retail space and putting the entire industry on the defensive. Given the pockets of strength within Urban Outfitters' stable of other brands, the retailer has some competitive advantages over peers with more concentrated exposure to single brand concepts. Still, Urban Outfitters has to work to maintain its attractiveness to fickle teen shoppers in order to recover.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Urban Outfitters and owns shares of Staples. 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.

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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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