Contrarian on WSJ The Score, December 15 2018

It was an only mildly outperforming week for the strategy, but still the third straight since starting to track. (ticker from last week’s column, monday open, friday close, % change, did it reverse direction, and would going contrary to posted number have beaten S&P).

See the full spreadsheet here.

Dec 8
NXST, +6.9%86.4485-1.7yn
UPS, -7.4%104.6698.66-5.7nn
BA, -4.7%321.27318.75-0.8ny
AZO, +6.8%874.07871.24-0.3yy
MDXG, -60%1.171.5532.5yy
FCAU, -4.1%15.2915.471.2yy
CVX, -0.4%115.3113.83-1.3nn
SPY263.37260.47-1.1

Contrarian trades on the WSJ’s The Score: Weekly Review for Dec 8-9, 2018

Weekly post from this sheet, tracking all WSJ The Score weekly roundups – how does a contrarian strategy against the 7 stocks reported weekly by The Score work the next week?

With the big market tumble this week, all stocks reported the previous week were down, so straight up the strategy only worked 3 of 7 cases…but in 6 of 7 cases it outperformed the S&P.

Looking closely these reports (listing stock & the percentage move) are one day changes in a given day of the week, not the overall week result, which is interesting, as a delayed contrarian strategy.

Dec 1
GM, +4.8 39 34.69 -11.1 y y
CPB, -3.7 39.19 37.77 -3.6 n y
TGT, +2.8 72.43 67.81 -6.4 y y
PZZA, -10% 48.35 45.08 -6.8 n n
BAYRY, -1.3% 18.875 18.095 -4.1 n y
MO, +1.8% 54.7 54.18 -1.0 y y
MAR, -5.6% 116 111.25 -4.1 n y
SPY 280.28 263.57 -6.0
Dec 8
NXST, +6.9%
UPS, -7.4%
BA, -4.7%
AZO, +6.8%
MDXG, -60%
FCAU, -4.1%
CVX, -0.4%

Outliers of the WSJ Management Top 250

In one of those meh everyone-gets-some-kind-of-award supplements the Wall Street Journal reported the Drucker Institute’s top 250 “best managed” companies.

There are five criteria: customer satisfaction, employee engagement, innovation, social responsibility, and financial strength. The categories are batting only 3-5 out of the gate. “Social responsibility” might be strike against management in some consideration, and Financial Strength can also be read different ways. If you have a good management team and good opportunity, shouldn’t you be levering up? Each of the 250 companies (of 752 reviewed large cap publicly traded firms) got star ratings on a 1-5 scale for each of the five categories: 1,250 total ratings. Grade inflation ran rampant: only 6% of them were a 1 or 2.

Usual tech suspects take the first seven positions. They’re willing to divest from Indiana if not Saudi Arabia which might help their responsibility score, and are throwing off oodles of patents and cash. Since they’re not restaurant chains of course they’re going to invest in their employees.

As one’s eyes’ roam down the printed page, I find it only interesting to pick out the outliers. Who are the unloved runts of the litter?

Of the 1,250 ratings there are only four one star ratings:

DXC Technology (DXC: $66) for Employee Engagement

Phillip Morris International (PM: $83) for Customer Satisfaction

Berkshire Hathaway (BRK-B: $220) for Social Responsibility

Comcast (CMCSA: $39) for Customer Satisfaction: no surprise there.

There are only 75 two star ratings (from my possibly erroneous hand count), highlights:

Amazon (AMZN: $1772) for Social Responsibility

General Electric (GE: $7) for Financial Strength (not 1? This maybe bankrupt once glorious stalwart is the eighteenth best managed company? $10 says their rating on this front was a four or five not very long ago.)

Wal-Mart (WMT: $99), and McDonalds (MCD: $186) for Employee Development. Wal-Mart and McDonalds have probably trained a fifth of America how to work in a corporate job. (I’m pulling that number out of my ### but it probably is enormous.) Wal-Mart openings in depressed areas can have a greater ratio of applicants to positions than Harvard. Training entry level workers to show up on time (and profit share!) is development of a different kind than Google’s and should be on a different scale.

Walt Disney (DIS: $116) for Customer Satisfaction. Wut?? Is there a chemical plant next to a population center also named Walt Disney? Are some people unhappy that ESPN is bundled in the cable plan? Talk to Comcast (see above).

Hewlett-Packard Enterprise (HPE: $15) gets two 2 star ratings (Employee Development, Financial Strength) yet still slides into a tie for 114th

The biggest laugher is Take Two (TTWO: $108) as a 2 star innovator. They’re redefining the cutting edge of open world gaming, providing the analogies for Elon Musk that’s its likely we’re living in a simulated world. This is the same rating given to fast food companies that haven’t changed how they or anyone else does business in many decades.

 

 

Keeping Score of The Score

The Wall Street Journal has a weekly section, The Score, which covers “The Business Week in 7 Stocks.”

This week caught my eye since Target (TGT) was the highlighted stock two weeks in a row. Last week, ending November 24th, TGT was down 11%, “as investors focused on rising shipping and labor costs and mounting supply-chain disruptions.”

This week: “The overall strong start to the holiday shopping season pulled up shares of several big-box retailers, including Target’s 2.8%” The second week didn’t reference the first – an odd omission for the set of readers that may take action on these blurbs.

It telegraphs a possible contrarian strategy – going countertrend to the market. Buy on the open Monday stocks that were down. Short on the open stocks that were up. Here is a spreadsheet where I’m going to test this for a while.

All seven stocks reversed direction Nov 24 to Dec 1 WSJ. So did the market, however. Still, 5 of the 7 trades in this strategy outperformed.

(NB, the 2.8% rise the WSJ has today must have been calculated from the Wednesday close, 69.26, not Friday’s close of 67.35. I’m generally not going to double check the WSJ % reports…and generally there won’t be holiday breaks with unusual trading like the Friday after a Thanksgiving.)

 

Nov 24 open Monday close Friday % change reversal? Outper. S&P?
TGT, -11% 68.07 70.96 4.2 y y
GOOGL, -3.8% 1044 1109.65 6.3 y y
Nissan, -5.5% 8.65 8.87 2.5 y n
LOW, -5.7% 88.67 94.37 6.4 y y
LB, -18% 30.32 33.11 9.2 y y
WBA, -2.6% 79.11 84.67 7.0 y y
CVX – 3.4% 114.7 118.97 3.7 y n
SPY (control) 265.78 275.65 3.7

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