Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investment thesis.
Welcome to 2014, fellow Fools. As you may know, we aren't a group that's prone to get too excited about movements in the market that last a day, a week, a month, or even a year. We're long-term, buy-to-hold investors who stay focused on what matters -- a years-long time horizon.
But we're also human, and that means that our brains will still get overly excited from time to time when our favorite stocks make outsized moves in just one day. To prevent you from making any rash decisions this week, let's cover three stocks that could cause some investor anxiety.
All three of these companies are heavily shorted -- or have lots of investors betting against their success -- and they are reporting earnings. Two weeks ago, we identified five stocks that shared these traits, and they moved an average of 12% following earnings. This week, these three companies could be in for a similar fate.
|
Company |
% of Shares Short |
Reports When? |
Expected Revenue (Millions) |
Expected EPS |
|---|---|---|---|---|
|
Micron Tech (MU 2.13%) |
13% |
Wednesday |
$3,700 |
$0.44 |
|
Apollo Education (APOL +0.00%) |
13% |
Wednesday |
$861 |
$0.90 |
|
SUPERVALU (SVU +0.00%) |
16% |
Thursday |
$4,100 |
$0.13 |
Sources: finviz.com, E*Trade.
Micron Technology
Last year was an absolutely fantastic year for shareholders of Micron, which saw its shares jump more than 250%. The year was highlighted by key acquisitions that helped Micron consolidate its power in the industry for dynamic random access memory, or DRAM, devices. Currently, the company has a 23% share in the industry. That, plus great sales for key customers -- none other than Apple -- gave investors lots to cheer about in 2013.
Many believe there's still a lot to be excited about. While demand from Apple will no doubt play a role in Micron's success in the year ahead, investors are also excited about increasing demand for DRAM from mobile devices. Bears are betting that, over time, competition and commoditization of DRAM will lead to lower prices, and lower profits. Wednesday's earnings release will be the first step in seeing which side has placed its bets wisely.
Apollo Education
Apollo is the parent organization of the largest online, for-profit educator: The University of Phoenix. Though 2013 represented solid gains for the company's stock -- up 34% -- it is still down about 70% from its 2009 highs.
A number of factors have combined to continually drive Apollo's shares down. First, with the economy slowly recovering, fewer people are using their stint of unemployment to get a degree. Second, traditional schools have begun offering online courses that are far cheaper than Apollo's. But by far the most important factor: The government has wisely cracked down on an entire industry that got rich by offering empty promises to students looking to get ahead financially.
Investors cheered in October, when Apollo reported earnings that far surpassed expectations. But for those who digged a little deeper, it was clear that Apollo still had problems, as the bleeding of new students continued. Bears believe that the downward trend in enrollment will continue.
SUPERVALU
When last year started, SUPERVALU was the parent company of several large grocery chains across the United States. By the end of the year, it had sold off its Albertson's and Jewel-Osco brands, among others. The market liked the move and rewarded shareholders with a 200% jump in the company's share price.
But those betting against the stock know that trends are still working against SUPERVALU. Among the chains SUPERVALU still owns, same-store sales continue to trend downward. With Wal-Mart and Target taking more and more share from traditional grocers, SUPERVALU could have a tough time proving it has what it takes to be a market leader in the years to come.
