Ok, the bad news on profit margins from Target (TGT) was a big deal. No argument. When you’re operating margin falls to 5.37% when Wall Street was projecting 9.5%, it’s a big deal. And after yesterday’s earnings miss from Walmart (WMT), it’s reasonable to extrapolate and say the entire economy and stock market has a cost, inflation, and margin problem.
But that doesn’t mean that every company has the same degree of problem. And it certainly doesn’t justify selling everything–and selling to the tune of big losses–shares of every company that sells stuff to consumers.
And tomorrow, or the next day, I expect a little more analysis and discrimination in the market. Some of the stocks hit hardest today should rebound handily on that rethink. I’d put PepsiCo (PEP) and Coca-Cola (KO) at the head of that group.
Some companies have pricing power so they can pass on costs to customers more easily. Some have better controls over costs than others. Some are less reliant on inputs that are suffering from big price increases.
But today in the shock at Target’s miss and 25% drop, investors and traders jumped to sell everything without asking what companies might be better positioned to withstand the pressures that have hit Target and Walmart so hard.
So I understand why Lululemon Athletica (LULU) shares would be down 10.79% on the day. Or why Macy’s (M) would be off 10.66%. Or why Farfetch (FTCH) would have lost 8.53%.
But Coca-Cola (KO) down 6.96% on the day? PepsiCo (PEP) off 6.20%? Two of the most stable consumer franchises in the global economy? With dividend yields near 3%?
Sign me up for the bounce.
I own Coca-Cola and PepsiCo in my Dividend, Jubak Picks, and 50 Stocks Portfolios.
