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Keurig Green Mountain (GMCR).
Tesla Motors (TSLA).
Fitbit Inc. (FIT).
The list of “cult” (or fad) stocks getting hammered today is long. And those beatings are yet another challenge for a market that’s already under fire.
What’s a cult stock? A company that makes only a handful of products, but that garners tons of media attention because those products are (or were) red hot. It doesn’t hurt if you have a glamorous, press-savvy CEO, or if you go public in a high-profile IPO that surges big-time on day one.
I wrote about a handful of them last October, citing King Digital Entertainment (KING), SodaStream (SODA) and GoPro (GPRO) as prime examples. While King has basically gone sideways since then, SodaStream just hit a fresh all-time low yesterday. GoPro is down about 30%.
Now, it’s the latest crop of cult names that’s suffering. Keurig tanked 30% today after the maker of single-serve coffee machines (and a soon-to-be-released countertop soda maker) warned of weak sales and earnings. The firm also said it would lay off 330 workers, roughly 5% of its employee base.
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| Keurig Green Mountain warned of a weak earnings outlook, and its shares took a major hit. |
Tesla shares dropped  8.9% after the battery-powered carmaker lowered its 2016 production outlook, and admitted to production problems on its Model X SUV. The company is also burning through gobs of cash by investing in product development and factory expansion, with its second-quarter net loss of $184 million almost triple the level of a year ago.
As for Fitbit, it just went public in June and has been climbing ever since. But shares of the maker of wearable devices to track exercise and health statistics tanked 13.6%Â today despite the company crushing earnings and sales estimates for the quarter. The issue? Questions about the sustainability of its momentum and profit margins in an increasingly competitive field.
The market action today shows both the opportunity and peril of investing in cult names. If you get in (and out) early, you can make a killing. If you overstay your welcome, you can get killed.
My preference in an unsteady market like this one is to avoid these kinds of names entirely. Instead, as editor of Safe Money Report, I focus on higher-yielding, higher-rated, higher-stability names that offer more “Steady Eddie” kinds of returns, or deeply beaten-down, dirt-cheap stocks that have already had the froth wrung out of them. In a challenging market, that’s where you want to be.
Email Link here: http://www.gliq.com/cgi-bin/click?weiss_martin+smr-main-lp+#ccode#+#email#+a446+6310167
So do you own Keurig, Tesla or Fitbit? Have they been good to you, or are you done with cult stocks? What kinds of alternatives look more attractive to you, if any? Or is this market so challenging, it’s time to just batten down the hatches and raise a ton of cash? Let me hear about it over at the Money and Markets website.
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Rates, rates and rates – those were being discussed actively on the website in the last 24 hours, and for good reason. The Federal Reserve is making more noise about raising them now than at any time in the last several years.
Reader Frebon said the Fed should move now so it has ammunition later if it needs to cut them again to counter an economic slowdown. The comments:
“They have to raise. If they were smart, they would raise it twice this year by 50 basis points each … but that is pie in the sky with this bunch. If China and Europe keep slowing down, the chance we will go close to or even enter a recession within two years is a real possibility. The Fed would then have no say in the outcome and no bullets left if they don’t raise.
“We need some inflation — and the velocity of money coming into this country will be astronomical if they raise aggressively. Also, finally savers will benefit and those on fixed incomes will have more to spend. The banks can also go back to their core business instead of taking on more and more risk.”
Reader Vibhaker B. added that a move is likely coming within the next couple of months. The comments there:
“I think the Fed will now hike in September or October. They have prepared the markets with repeated opinions by Fed governors and Chairman Yellen. They know the rates have to rise, and with unemployment rate continuing to fall, it is time to move so they can get a few hikes in place before we get into Presidential election cycle.
“Their main concern is to avoid a market meltdown. So by gradually changing the nuance and individual governors expressing their preference for a hike, they have kind of got the market to come to terms with a fait accompli.”
But not everyone is convinced the Fed will or should hike at this time. Reader Tradewinds said: “It sounds like they’re planning to tighten just like they did back in the 1930s — which is amazing since today’s ‘they’ fault yesterday’s ‘they’ for tightening. Today’s ‘they’ also say those hikes caused the problems back then. Go figure.”
| “IÂ expect turmoil and volatility will pick up even more when and if the Fed decides to act.” |
Reader Chuck B. also said he’d be surprised if the Fed pulled the trigger anytime in 2015. His view: “It’s hard to believe the Fed will raise rates this year. That would cause all debt to become more expensive, and since our economy is now built on debt, that would be very deflationary and kill any recovery for at least some time.”
Thanks for sharing your thoughts here. The “Will they or won’t they?” game has been going on for a long time, but it does appear we are finally on the threshold of a move.
The markets are already reacting to that possibility, well in advance of an actual hike. I expect turmoil and volatility will pick up even more when and if the Fed decides to act. That’s why I’ve been singing a much more cautious tune lately.
If you haven’t weighed in yet, don’t miss your chance. Go to the website and let me know what you’re thinking as soon as it’s practical for you.
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The food giant Mondelez International (MDLZ) is in activist investor Bill Ackman’s sights. The Pershing Square Capital Management investor has built up a 7.5%, $5.5 billion stake in the company, and started to pressure it to cut costs, boost revenue more quickly, or merge with a rival.
Mondelez has a profile of food brands that include Oreo cookies, Ritz crackers, Trident gum, and Philadelphia cream cheese. The company itself was spun out of the old Kraft Foods in 2012.
At least one policymaker pushed for an interest rate hike today … in the U.K. The Bank of England’s decision-makers voted 8-1 to keep rates at 0.5% there, and pointed to muted inflation as a reason not to move forward just yet. But strong wage and job growth in the U.K. makes it likely the country will be neck-in-neck with the U.S. in the rate-raising race.
President Obama is continuing his push to get Congress on board with the Iranian nuclear deal. In a speech at American University yesterday, he said that a “no” vote on the deal would push the U.S. toward war with Iran at some point down the road. It remains to be seen if he can convince Republicans (and some Democrats) with his approach.
The Securities and Exchange Commission voted in favor of forcing companies to disclose how much more CEOs make than average workers yesterday. USA Today chose the moment to release an analysis of S&P 500 pay, in conjunction with Glassdoor.com.
Its review showed that the average S&P 500 CEO makes 216 times his or her median employee. Believe it or not, that was actually smaller than the 373-to-1 ratio the AFL-CIO found using different methods earlier in 2015.
Is pay at the top of the corporate ladder out of control? Do you think Obama’s PR blitz will (or should) convince reluctant legislators? Are you planning to watch the GOP debate later tonight? If you do, let me know who you thought was the big winner, and the big loser.
Share your thoughts on these or any other news stories at the website.
Until next time,
Mike Larson
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
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shame on any Rep or Senator that votes to let our children and grandchildren deal with a nuclear Iran. We should start accumulating money in a fund that will have the wherewithal to
publicize these miscreants and to ensure they don’t get re-elected which is all they care about anyway. I think we can go grass roots and fund this in a way that will make these officials understand that they work for the people and not the other way around. Let’s start with Chuck Shumer if he supports it. We can forget California because they are too dim witted to realize what incompetents Feinstein, Boxer Shiff and Pelosi are but the rest of the country will make the difference.
If the public or an employees knew just how much some of the top level executives really make plus generous stock options they might revolt. Trust me I personally know a few! Some start at $10-20 million. That’s about all I dare to say. This WILL be something to see:).
“Will they?” or “Won’t they” Of course they will… Institute negative interest to take one last advantage of everyone that has any money left in the bank.
Look how well negative interest worked in Europe.
The Fed has next to no other choice… Oh, and isn’t negative interest an additional cost to Americans who pay the bills from a bank… A tax for the privilege of keeping your money there for paying ordinary bills.
Negative interest is all about leading us quickly into digital currency where the banks and the government crooks (aka IRS) will be able to see every penny that passes thur our accounts in the conduct of ordinary everyday commerce.
The Fed is all about banking and keeping the government in spending money, “they” have little to no consideration about the general populace…!
As for the Iranian deal, if it is approved, Iran would be operating under restraints, at least for the period involved. If it is not approved, she would be free to go ahead with nuclear development with NO restraint. She may even have more reason to do so.
I wouldn’t waste time on the politicos’ big debate. The talking heads will let me know all about it afterward. It seems set up to favor The Donald, anyway.
You think that might be because the Donald has been saying what the other RINOs are afraid to say to protect their politically correct a$$es…?
Protect their politically correct a$$es?… No, just to protect their reputation for civility, respect, decency, and professionalism. They don’t need to insult others to make gain for themselves.
Cult Stocks: I have always avoided such stocks. I have smugly sat back for years enjoying great capital gains and generous dividends with the “boring” pipeline companies like PAA, KMP, and NGLS. Now all of sudden they are beginning to look a lot like the worst cult stocks. In a word, I’m getting killed. PAA spilled oil in Santa Barbara, but that’s why they carry a lot of insurance. I’m at a loss. If anyone can enlighten me I would really appreciate it. Thank You. Jim
I am pleasantly surprised by tonight’s debate. I think any of them would be better than another Clinton. Clinton has the advantage of having every Progressive getting out and voting for her no matter what she says or does. We must understand this and realize it’s not so important who the nominee is but will Conservatives have the brains to unite behind whoever our nominee is. Like Reagan used to say,”a half a loaf is better than no loaf”. Jim
Since January I have be saying the fed will hike rates in October 28th 2015 Yes “Triple Eve of what people call Halloween” the people who predict month after month sooner or later are going to be right. Get Ready Get Ready October will be the most important month of the “Whirlwind year of 2015” Watch what happens in 2016 . Israel will go alone get ready Iran fireworks provided by Israel come showering down on you what a July that will be. The President of the United States his presidency is already ended and is still in office. The next president will be a he and not a she. He will slow done the debt . Many will not like it but he will be doing the right work for America.
History does not support what you are saying…. The GOP had the majority and the White House in 1929 and 2007….. And the Democrats had the majority and the White House in 1932 and 2009… Debt began going parabolic with the election of Reagan and kept going up under both Bush Presidencies… Perhaps the propaganda is wrong…. Gobbles was famous for repeating untruths over and over again until the gullible began to believe the untruths as gospel…. That did not work out so well did it…
Mike Larsen says this morning that he is getting worried, and well he should. Both the Dow and the S&P broke their long uptrends from 2009 in the later part of 2014, and haven’t gone above them since, though they have gone numerically higher. Both seem to be rounding off, and may have seen their peaks in this climb before starting downward. After such a long climb, it would seem likely they could fall substantially. Neither have had a serious correction during their runs upward, though, so we may just see something like a 30% to 50% correction from 2009, before resuming the uptrend that Larry says is coming. The alternative could be much worse, if it turns out the political money dabblers have finally blown their wad.
I see that a proposal has been made that the Washington Redskins should change their controversial name to the “Red Clouds” to honor a particular chief. Considering their location in the seat of so much political and fiscal controversy, maybe “Black Clouds” would be a better choice.
Back the truck up its that time 60 days early is better than 1 day late.
Al,No truck, No car,will my motor bike OK
Yep just used your sattlebags silver was a good price two Fridays ago at 14.59 load up my friend it’s cheap I won’t sell tell it gets to fifty.and don’t touch the stock market with a 10 ft. Pole