In Focus: First Half Winners & Losers
Thanks for checking out this week's In Focus, a look into a company, companies, or markets that made Wall Street's news cycle. This week I bring the winners and losers of the first half of 2019 in focus.
With market's taking off the way they did at the start of 2019 it only makes sense that investors experienced big winners in the first half of 2019, and naturally where there are winners, there are losers. But let's focus on the winners for a moment.
Warren Buffett has said that the stock market is a machine that transfers money from the impatient to the patient. Three big winners of the first half of 2019 have done well to prove Warren Buffett's theory. Xerox (XRX), Advanced Micro Devices (AMD), and Chipotle (CMG) have rewarded patient investors in 2019.
Xerox closed out 2018 trading at $19.76 per share with little expectations for 2019. From 2015 to 2018 Xerox's revenue has declined every year, and revenue is expected to decline in 2019 and 2020. So why has the stock seen such success in 2019? One reason that has caused investors to accumulate Xerox shares is the company's outlook on EPS growth. Since revenue is in decline Xerox has decided to put it's focus on retaining more of the money that it makes. The company has been able to expand operating margins, which has had a positive impact on it's earnings per share.
As of this writing Xerox is up 84% on the year.
Advanced Micro Devices
Advanced Micro Devices closed 2018 trading at $18.46 per share. AMD's chart going back to 2000 is very boom and bust. The stock saw a big run up in 1998, 1999, 2000 then a big decline, another big run up in 2005, 2006, then another big decline. The stock spent 2009 through 2015 ranging between around $2 per share and $9 per share. Then in 2016, the stock broke over $10, but ranged again. Then in mid 2018, the bulls entered the stock and pushed the stock to levels it hadn't seen since 2006.
AMD has a host of new products on the way like the Radeon RX 5700-series gaming graphics card, the Zen 2 CPUs, the X570 chipset, and third-gen AMD Ryzen desktop processors, The Zen 2 CPUs will be the first 7nm x86 processors to hit the consumer market. With AMD's new product line they've been able to cut into the market shares of competitors like Intel (INTC) and Nvdia (NVDA), and for that Wall Street has rewarded them with a stock price that won't stop going up. As of this writing AMD's stock is up 70% since the start of 2019.
Chipotle closed 2018 trading at $431.79 per share. Prior to 2015 Chipotle's stock was a rocket, there was no telling how high it could go. Then the E coli outbreak happened and the stock couldn't stop falling. In early 2018 the company hired Brian Niccol away from Taco Bell and Yum Brands (YUM) to be its new CEO.
Wall Street loved the new hire and Chipotle shares started moving up immediately. However, the party came to a brief end when the overall markets sold off in late 2018. Chipotle's stock price fell along with many other stock prices. But as 2019 rolled in Chipotle's stock price again began to move up like a rocket.
The new CEO has put an emphasis on digital sales and has mixed that with a loyalty program. These tweaks saw digital sales increase by 66% in Q4 2018. As of this writing Chipotle's stock is up 71% since the start of 2019.
Let's briefly discuss a few losers of the first half of 2019. Nordstrom (JWN) is down 31% on the year, Fossil (FOSL) is down 30% on the year, Urban Outfitter (URBN) is down 28% on the year, Gap (GPS) is down 28% on the year, Macy's (M) is down 27% on the year, and Kohl's (KSS) is down 25% on the year. All retail, all companies that still have not adjusted to the way consumers want to shop, but have found every way possible to blame Amazon for their own failing businesses.
It's 2019 retailers, get it together. Create an online experience for your customer that is exclusive to your brand. Also, create a better in store experience for the few people that enter your brick-and-mortar facilities, make it SnapChatable or IG post worthy. Until retailers can start getting creative and stop blaming Amazon they remain an AVOID on my watch list of investments.
Of the first half winners for 2019, the one I like the most is AMD. Not because I believe AMD is head and shoulders better than Xerox or Chipotle, but because one of it's major competitors seems to be imploding. I don't know if it's what AMD did right or what Intel did wrong that has contributed to AMD's current stock price. Intel has started to fall behind and AMD has been able to take advantage and cut into Intel's marketshare. I foresee more tough times ahead for Intel and for that reason I think AMD is BUY.
This is where I leave you, with a BUY on AMD. Thanks for checking out this week's In Focus. May your next investment be your best investment.