Even on a day when the Dow Jones Industrials Average (INDEX: ^DJI) soars 1.62%, perpetual Dow laggard Hewlett-Packard (NYSE: HPQ) somehow finds a way to kick investors in the pants. The shell of a former tech titan fell nearly 2% for the day on a multitude of bad news. At the top of the list, some analysts are calling for a breakup. Meanwhile, Lexmark’s (NYSE: LXK) bearish call for slowing corporate spending spells disaster for HP’s third largest division, and now, General Motor’s $600 million services deal appears at risk, as the company plans to bring their IT work in-house. It’s the world’s least surprising one-two-three knockout punch for the tech company that’s far-and-away the worst performer on the index this year.
The misery is getting spread well off the Dow, though, as Supervalu (NYSE: SVU) and Green Mountain Coffee Roasters (Nasdaq: GMCR) fell 13.8% and 7.4% respectively. I have to admit a bit of a 'Mea culpa' on Supervalu, because I expected the company to right the ship with their too-crazy-cheap-to-ignore price to free cash flow ratio. But in the face of a huge earnings miss, news about "strategic alternatives," a dividend suspension, and a 3.7% same store sales decline in their retail food division, I can admit that I was wrong. This stock appears rotten at the core, and has only built on their enormous share price implosion yesterday. Even the most aggressive debt paydowns can’t shroud the fact that consumers just don’t seem to want to go to their stores.
As for Green Mountain Coffee Roasters, I’ve been bearish on this company for some time now, and feel a bit vindicated on my Supervalu miss by the company’s nearly 11% decline over the last three days. The java brewer may seem like the intersection of a deep-value stock with high-growth potential, but this company also seems too wounded for me to support an investment today. The uncertainty surrounding the expiration of their k-cup patents can’t be over-stated. Major grocery slingers from Safeway to Kroger have already started selling cheaper pod alternatives, and I believe they could be the first drop in a bucket of growing competition for the king of single-serve coffee.
How to play it
What does it all mean? On a day when the market is soaring, some stocks are still losing big. Should investors put their tails between their legs and run for bonds or some other "safe" investment? NO! Just yesterday, I wrote about why the market was a screaming buy, and gyrations like this are the friend of the long-term investor.
The patient investors who recognize big swings for what they are will benefit in the long run. Watching the market swing up and down is no way to invest, ever. Instead, investors should buy and hold great stocks for the long run, like The Motley Fool's Top Stock for 2012. It’s our chief investment officer’s highest conviction stock for the next year, and it will probably be yours, too, after you read his reasoning by by clicking here now.
