Tags: La Monica | Dow | rally | HP

CNNMoney’s La Monica: Stock Market Rally Led by ‘Garbage’

Friday, 29 Mar 2013 12:03 PM

By Michael Kling

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The stock market rally is being led by “garbage,” asserts Paul La Monica, assistant managing editor of CNNMoney. Stock market leaders are really losers.

You’d think companies with stock prices rising the most would have the strongest increases in earnings. Wrong.

“Instead, investors have been rewarding many of last year’s dogs on the hopes that things won’t be as bad as in 2012,” La Monica writes in his column. “It’s a rally led by garbage that only Oscar the Grouch could love. Call it the Tom Petty market. Even the losers get lucky sometimes.”

Editor's Note: The Final Turning Predicted for America. See Proof.

Take Hewlett-Packard, the Dow’s best performing stock by far this year, gaining 66 percent. That’s despite the danger of being marginalized by the growing trend to mobile Internet devices. The PC maker that missed the mobile boat is trying to remake itself into a software and tech services provider, but it has warned that a turnaround will take years and earnings and sales are expected to fall this year.

Micron Technology has gained 57 percent this year after being flat last year and falling 20 percent in 2011. “Investors seem excited that DRAM prices may have finally bottomed,” La Monica notes, “but this is a company that still has big ties to the woeful PC business — and it’s also continuing to lose money.”

Volatility seems common in high-tech. Groupon is up 29 percent this year and Zynga, another social media firm, is up 42 percent. Both, he explains, fell over 70 percent last year.

Retail firms also have gone from “zero to hero,” La Monica says. Best Buy is up 87 percent even though it still faces tough competition from Amazon and Wal-Mart. Investors hope Best Buy CEO Hubert Joly will save the ship, but that’s not an easy trick, La Monica warns. “Just ask JCPenney CEO Ron Johnson or any executives who used to work for the now-defunct Borders or Circuit City.”

Although grocery store chain SuperValu dropped almost 70 percent last year, it has more than doubled this year even though it repeatedly missed earnings forecasts and is expected see sales drop this year.

While HP, which increased dividend 10 percent in mid-March, was the Dow’s biggest gainer at 67.3 percent in the first quarter of 2013, American Express (17.4 percent), Travelers (17.2 percent) and Johnson & Johnson (16.3 percent) also contributed the index’s first quarter rally because of their higher share prices, Forbes reported. The Dow is weighted by price instead of market capitalization.

Editor's Note: The Final Turning Predicted for America. See Proof.

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