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.
Wall Street was in an upbeat mood Thursday, as nearly seven in 10 stocks advanced, and all 10 market sectors posted gains. I don't see what investors were so happy about. Both major data points that came out today, jobless claims and retail sales, came in worse than even the most pessimistic Bloomberg estimates. Stocks have now erased nearly all of January's losses as the fear surrounding an emerging markets contagion begins to die down. The S&P 500 Index added 10 points Thursday, or 0.6%, to end at 1,829.
Shares of high-end organic grocer Whole Foods Market (WFM) shed 7.2% today. Not surprisingly, the sell-off stemmed from a disappointing quarterly report, as many drops of this magnitude often do. There wasn't much good news to go around, as profits advanced by just more than 8% -- growth that, if continued, hardly justifies the company's lofty earnings multiple of 35. Of course, Wall Street is always looking to the future, and Whole Foods Market disappointed there, too, giving revenue and earnings guidance that lagged prior company estimates. As more high-end grocers enter to compete directly with Whole Foods, the stock's days of uber-high growth may be a thing of the past.
Of course, growth slowdowns come with the territory of being a larger company. Berkshire Hathaway's Warren Buffett, for instance, famously said that if he had $1 million to invest, he could generate 50% yearly returns. His holding company, now worth more than $280 billion, now considers a good year one that merely beats the broader stock market. Cisco Systems (CSCO 2.29%) is familiar with this concept; its days of the hypergrowth it experienced in the 1990s are well behind it. Cisco revealed that it expects revenue to actually decline by between 6% and 8% in the current quarter, news that sent the stock 2.5% lower in trading.
Western Union (WU 1.72%) stock dipped 1.4% Thursday, putting an end to a four-day rally. Investing in this money-transfer service requires -- to put it mildly -- patience and a longer-term mind-set, though I'm not sure that Western Union's long-term outlook is even attractive. Sales were flat in the most recent quarter, as earnings declined. Thinking more broadly, I wonder if Western Union will continue to remain relevant 10, 20, or 30 years from now. As Internet access becomes a truly global standard, and competitors continue popping up in the payment-services market, I fear that mobile-oriented, forward-thinking tech rivals will turn the Western Union name into a synonym for antiquated payment solutions. In fact, I think those perceptions have already begun changing.
