Three names on this new-high list intrigue and confuse me today: 3M MMM , Wal-Mart WMT and Monsanto MON .
They confuse and intrigue me because the last time they spoke, they disappointed. 3M issued guidance recently that said because of weak global growth, its previous plan had become a stretch plan. Not only that but analysts cut numbers. Yet the stock is up 16% this year.
Wal-Mart missed its estimates by a great deal and got hit immediately. Ever since then, though, it's been roaring back higher.
Monsanto? Earlier this week, the darned thing was clubbed big time in a widely acknowledged miss of the estimates. In fact, it was regarded as the biggest disappointment of the week.
Usually, stocks are in the penalty box when they miss numbers. They tend not to go higher until we see convincing evidence of improvement. But 3M, Wal-Mart and Monsanto have had no good news in the interim.
When you get three high-profile stocks like this to run after bad news, it says more about this market in general than these stocks specifically. It says that you have to open your mind to price breaks. It says that companies such as Nike NKE , Coach COH , Norfolk Southern NSC , Bed Bath & Beyond BBBY and FedEx FDX have to be re-examined, if only because the opportunities we got from 3M, Wal-Mart and Monsanto can't be isolated.
What could be the bull case for each? We think Bed Bath & Beyond, which we have been buying for Action Alerts PLUS, can be bought because some of the reasons why it missed have to do with short-term concerns involving an acquisition. Coach happened because the CEO took his eye off the American market, and I bet that won't happen again. Nike's already bouncing back -- I think because people are betting that China's weakness could be one-off. FedEx? Big analyst meeting coming up next week with expectations extremely low. Finally, there is Norfolk Southern, a coal play that could improve if natural gas keeps climbing.
Look, not everything can bounce. We got that horrendous number from Hewlett-Packard HPQ , and I see nothing there to buy. But Hewlett-Packard lost that luster ages ago; the stocks I am highlighting have all been pretty darned good until recently.
I think ultimately what 3M, Wal-Mart and Monsanto are saying is that this is a forgiving market, willing to accept short-term stress because things could get better. It's an optimist's market.
And you have to use short-term disappointments in order to get longer-term gains.