Think about these facts:
Past 8 Trading Days: My MFI is down 2.8% S&P Small 600 is up 1.2%, S&P mid 400 up 1.2%
Past 13 trading Days: My MFI is down 10.8% S&P Small 600 is down 5.3%, S&P mid 400 -4.9%
What is going on? Why this 4 to 5 point differential with comparable indices? That is a big difference over such a short time frame. At first I thought it was a flight to quality. But when I look at this and see the difference exists in mid and small caps, it is more than that.
Today it seemed exacerbated. I saw PACR and UNTD, both of which I felt had strong earnings go from being nicely in the green early in the day to ending in the red. They were both down over 6% in the middle of the day. VPHM and GVHR were both down about 10% on absolutely no news on a big green day. What gives?
It isn't a sector. It isn't small caps. The only thing all these stocks have in common is MFI. Here is my hypothesis. JG himself suggested the same. The MFI stocks fell so much faster than the averages at the beginning of the correction that it has shaken people's faith in MFI. So since then, people have been selling on up days, pushing the MFI stocks into the red. I think a lot more people had been buying MFI stocks (and now selling) than perhaps we realize. And in addition, some of these stocks are not exactly high volume stocks, so if a small fund is unloading, it can really depress the price.
What does it mean if this is true? If you still have faith in MFI, it means this under-performance is temporary and we can expect the stocks to bounce strongly back. In fact, it implies that this is the best MFI buying opportunity since I started. What do readers think? Are investors giving up on MFI? If so, is that perversely good for those of us who stay the course?
FTO - had an absolute blow out quarter (Frontier Oil Reports Most Profitable Quarter in Company History). I can not understand how the stock only went up 2%. Strangely, WNR (which did not report) was up 9%! FTO has an EV of about $3.5b. In the preceding 4 quarters (which were not shabby) FTO had EBITDA of $675m. In this quarter alone, their operating income before depreciation and taxes was 510m!!! That is ungodly. Yet the stock closed today at $36, essentially the same price from 12 months ago. Go figure. People will crunch the numbers and the stock will rise.
NOOF - what a disappointment (New Frontier Media Reports 2008 Fiscal First Quarter Results and Announces New CFO). Down 15% on subpar earnings. With these small companies, revenues can be extremely lumpy. I am not ready to throw out the bath water yet, but it was depressing.
UG - Ugh. You know it is bad news when the headline is bragging about how they have done in the past 6 months as opposed to the past quarter (United-Guardian Reports Strong Six-Month Sales & Earnings). Sure enough, when you strip out just the quarter it was just flat, this caused a 22% decline in the stock price. Y'know though, looking at everything, the 22% hit is ridiculous! I may step on the ledge (don't jump!) and claim that UG at $8,75 is extremely appealing.
Some one the Yahoo Board was clever. He said we all need to go home and download some porn while buying some Heelys. HLYS has been on the lists the past month or two and was down an unbelievable 48% today. I didn't study the report, but I can't believe the company is worth 1/2 today what it was yesterday. Ouch, my sympathy to those of you caught in that meatgrinder. Maybe I should not go to the top 25 approach.
Finally, I have switched my blog to a new color (green) to see if we can't get things going in the right direction again. Good investing everyone!