Wyatt Research Week in Review: June 21-27

The world’s most dominant social media company is now worth more than the largest retailer on the planet.
On Monday, Facebook (NASDAQ: FB) bumped Wal-Mart (NYSE: WMT) from the top 10 highest-valued companies in the S&P 500 index. As of Thursday’s market close, Facebook had a market capitalization of $246.6 billion, compared to a $231.4 billion market cap for Wal-Mart.
Facebook shares are up 12.8% year-to-date. Shares of Wal-Mart have fallen 16.3% year-to-date.
Does this week’s news have anything particularly profound to say about the rise of the social media age or the decline of the brick-and-mortar big-box store?
Probably not.
Wal-Mart is still reeling from a rough first quarter that saw earnings per share decline 7% year-over-year – largely due to unfavorable currency exchange rates and the short-term effects of employee wage increases.
Facebook, meanwhile, is riding high while its closest social media competitor, Twitter (NYSE: TWTR), still hasn’t recovered from its embarrassing earnings leak on April 28, when the stock plummeted more than 18% in a single day. To make matters worse, Twitter is in the midst of an identity crisis since the announcement earlier this month that CEO Dick Costolo will step down effective July 1.
Still, it’s interesting to recall that Facebook was thought by many to be a publicly traded bust after its disastrous initial public offering in May 2012, in which a Nasdaq snafu led to a delayed opening and shareholders sued Facebook for allegedly withholding negative information about the company. Facebook shares were down 24% after their first seven trading days in 2012. Investors had lost more than $21 billion.
So if there’s any nugget of wisdom to be gleaned from the recent Facebook news, it’s that it’s typically unwise to get caught up in IPO buzz, be it positive or negative hype.
As I wrote in this space last week, Fitbit (NYSE: FIT) closed its first day as a publicly traded company at $29.68 per share – 48% above its IPO price. As of Thursday’s close, the stock was at $36.59. But for long-term investors, the Fitbit frenzy is just sound and fury, signifying nothing.
If you’re investing for the long haul and think Fitbit has healthy fundamentals and long-term growth prospects, buy it. If you don’t, skip it.
On that note, here are some of my favorite Wyatt Investment Research articles from the week:
The Right Investing Strategy for Every Investor – Smart investors know that the key to a successful investing strategy is avoiding the whipsaws caused by meaningless chatter, such as the current Greek debt crisis hullabaloo. Top Wyatt Research analyst Steve Mauzy has indentified a “forever stock” investing strategy which cuts through the noise and focuses on companies that offer the opportunity for decades of wealth accumulation.
Will Fiat Chrysler Get ‘Smart’? – In May, Fiat Chrysler Automobiles (NYSE: FCAU) CEO Sergio Marchionne spent time with fellow chief executives Tim Cook of Apple (NASDAQ: AAPL) and Elon Musk of Tesla Motors (NASDAQ: TSLA). He also went along for a ride in one of Google’s (NASDAQ: GOOGL) self-driving cars. Then in June, General Motors (NYSE: GM) flatly rejected a merger approach from Fiat Chrysler. Is it time for Marchionne to throw in the towel on the traditional automotive business model and embrace the self-driving car revolution?
Activist Intervention Makes This Packaged Food Stock Intriguing – The largest private food company in the U.S. has found itself the target of an activist investor after not living up to expectations. Though the company has paid a dividend for the past 29 years, its quarterly payout has been stuck at 25 cents a share since October 2012. But things just got a lot more interesting with the intervention of noted activist Jana Partners.
Sonic Bust: Fast-Food Stock Tanks After Weak Earnings – Shares of Sonic Corp. (NASDAQ: SONC) crashed 10% Tuesday after it released disappointing earnings and announced that it will open fewer franchised restaurants than anticipated. Is the drive-in chain in trouble, or was the share hemorrhaging misguided panic selling?
Wall Street Firm Takes Aim at Main Street Lenders – Goldman Sachs (NYSE: GS) wants to lend you some money. No really, the nearly 150-year-old Wall Street firm is hoping to break into Main Street lending. If all goes as planned, Goldman’s new consumer lending business could put pressure on conventional lenders, as well as “new” lenders like Lending Club (NYSE: LC). But will it work?
Tesla’s Elon Musk: This Is the Next Frontier – Tesla founder Elon Musk revolutionized mobile payments, electric cars and space travel. And Tesla’s next over-the-air auto software updates could mark a turning point in the history of vehicular travel.
How to Play the Looming Superbug Threat – Jim O’Neill, the former chief economist at Goldman Sachs, is best known for coining the BRIC acronym, which stands for the emerging market countries Brazil, Russia, India and China. But now he’s warning of the rising threat of antibiotic-resistant microbes known as “superbugs,” which according to the World Health Organization could lead to a “post-antibiotic era, in which common infections and minor injuries, which have been treatable for decades, can once again kill.”
The Best Way to Prepare for the Inevitable Market Slowdown – Realistically, do you think the market is going to repeat its performance from several years ago, when the S&P 500 rallied 32.4% in one calendar year? If you agree with Wyatt Research options expert Andy Crowder that the current range-bound market will ultimately lead to a bear market, I invite you to check out his strategy for profiting from investor fear when the inevitable market retreat occurs.
Have a great weekend!