The stock market is a ticking time bomb that can be neither defused nor ignored. Every passing second brings us closer to an explosion that’s likely to rip the ozone layer off the earth, sending your life savings into space. At least that’s roughly the message of Brian Sozzi, Chief Equities Analyst for NBG Productions.
Though the above slightly overstates his outlook, Sozzi is more than willing to play the role of “Johnny Grim Reaper” for the purposes of the attached clip. While the news flow from overseas is troubling, to be kind, Sozzi says it’s Wall Street’s reaction that’s concerning him most.
As evidence, Sozzi offers the collective yawn that greeted Texas Instruments’ (TXN) guidance last night when the company tightened its estimate range and affirmed EPS estimates. While the TXN announcement is no great shakes, it’s certainly positive given the outsized impact a slowdown would have on the tech space. Instead of rallying, TXN barely hiccuped, leaving it below where it was on Monday’s open.
When positive news, like the Spanish bank bailout for instance, has such a short shelf life, Sozzi has a hard time staying constructive on markets. The risk, he says, is a break to the downside for stocks unless or until markets are willing to give companies the benefit of the doubt. Sozzi is quick to add that it’s not a call to go short, but just a preference for cash.
Sozzi isn’t all doom and gloom though. He’s got three places to put cash to work once the time bomb explodes (or on a decent pullback).
The Same Store Sales are strong, input costs are going down, and European concerns are understood. With the stock well off April highs Sozzi says it’s time to pick away on the long side. (Note: I’m long SBUX.)
Like coffee beans, the price of cocoa beans is sharply lower, down by about one-third in the last 12 months. Even better for Hershey, the company has been able to send through price increases without negatively impacting volumes. Increasing both margin and quantity sold is obviously a good thing.
General Electric (GE)
The company offers a good yield and is “in high growth areas within the industrial sectore,” says Sozzi. Or perhaps more simply, “maybe the world is not going to end,” he hedges.