If life on whaling vessels was endless hours of tedium interrupted by moments of stark terror, the stock market in 2014 has been more along the lines of ice fishing. Weeks of trendless unpleasantness with brief periods of vague optimism (“is that a nibble?”) or fear (“did you hear the ice crack?”).
So far all we have to show for a correction in the Russell 2000 (^RUT) and select destruction of former darlings like Yelp (YELP) and Twitter (TWTR) is a 3% gain in the S&P 500 (^GSPC) and at least a dozen short pullbacks announced by deafening cries of “I told you so” followed by lack of follow through.
With May lurching towards the finish line it is perhaps time to consider the possibility that this year just might be nothing but chopping and frustration for most investors. “That’s the market we’re in,” says Mark Lehmann of the noisy carping but lack of action. “We’re going to see ups and downs and investable ideas, but I don’t see a huge correction.”
The head of JMP Securities does have a couple ideas, one from the select few stocks to have gotten clobbered this year and another in the form of a recent IPO.
His first is Rackspace Holdings (RAX). The former high-flying cloud business has seen it’s stock smacked both by the general tech sell-off and fearsome competition in the form of Amazon (AMZN). Now that the cloud business has gotten less trendy Lehmann says this “real business” is priced to move higher.
His next pick is recent IPO La Quinta Holdings (LQ). The hotel chain most well-known for moderate pricing does not, as the joke claims, mean “behind the Denny’s” in Spanish but the stock has been left in the dumpster just the same. Shares have done nothing since the April IPO when private equity firm Blackstone (BX) stuffed the stock out into a somewhat unwilling market. Lehmann says the company has earned the benefit of the doubt from buyers.
“They’ve put up a good quarter since they went public. It trades at a discount to its peer group. They’ve rebranded the company. The rooms look better the experience is better. It’s a good chain. They’ve done really well and we expect that to continue.”
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