Most of the stocks had great earnings in 2019, but not the following ones. When the first-quarter of the earnings season ended, the results were great for many companies. But for some it was a weak period in terms of cash. More than 50% of the organisations in the S&P 500 reported earnings, and 75% of them stated that their income is above their expectations. Their profit is 5% higher than they predicted.

 

For many companies the earnings season was a great surprise, but some got a negative response from the market. The stocks of the following companies failed to impress investors. Here is a complete list of shares that under-performed at the beginning of 2019.

 

Intel (INTC)

The first name on the list is Intel. It’s earnings bumbled up in the last quarter of 2018 and even if they hoped they’ll get back on track in 2019, the first part of the year did not bring the results they expected. Their earnings are not great and they are recovering slower than they predicted.

 

After CEO Bob Swan stated that he expects the organisation to gain great revenue, the shares dropped with more than 5%. In no more than a month the shares dropped by 15%, and specialists state that they will continue to fall. The investors who want to invest in INTC stocks are advised to first analyse the tendencies of the market and then make a move.

 

The main reason Intel no longer has great earnings is the increasing competition from AMD. They’re no longer the main chipmaker on the market, and the public has started to choose AMD because it comes with more features. AMD’s success forces Intel to cut prices to remain competitive, but many investors find this a bad strategy because they should compete on innovation, not on price.

Chipotle

Long story short, 2019 is not a great year for Chipotle. On May they registered a drop in their shares by 5,6% because of the high prices they had to pay for pork meat. The African Swine fever was devastating for pig farms and because more than 10% of pigs in Asia were infected, the price grew. It’ll take more than one year to rebuild the global swine population to a level that can meet the market’s demand, and until then pork meat is sold at high prices.

 

If the event from May wasn’t enough to disrupt the business, in September the New York City Mayor Bill de Blasio’s administration sued the restaurant chain stating that they violated the city’s Fair Workweek Law. The city labour law states that all fast-food companies need to create predictable schedules for their employees. 30 employees working in 5 different locations filed complaints with the Department of Consumer and Worker Protection, stating that their employer did not offer them work schedules 14 days in advance.

 

Chipotle also did not ask its workers if they approve the last-minute changes. The complaints also note that the restaurant chain did not offer them pay premium when they close the store one day and open the next one. The lawsuit announcement made the shares to drop with more than 4%.

 

Nike

Nike is another company that reported that its quarterly revenue did not meet the Wall Street estimates because their sales did not reach their predictions on their main market, North America. This led to a 5% drop in their shares.

 

The drop was surprising because Nike’s overall shares grew by 19% thanks to worldwide sales. The sportswear maker adopted a new strategy that focuses on online sales, new products and supply chain improvements that bring new products faster to stores.

 

Nike launched multiple collections in collaboration with athletes and celebrities managing to create buzz around the brand. They introduced two models of sneakers in the US to catch people’s attention, and they didn’t expect their sales to drop. They predicted they’ll earn $3,87 billion, but the analysis showed that sales percent rose only by 7% and they made only $3,81 billion.

 

They didn’t manage to identify the factors that caused the drop, but they think the incident with the Duke University player’s shoe hurt the brand. Zion Williams sprained his knee when his Nike sneaker split during a game, and he started a social media negative campaign against the company.

 

Another factor can be the fact that Nike is focusing on growing their Jordan line and they neglect Converse that has started to lose to its competitor Vans.

What should investors learn from the above scenarios?

Investing in stocks is similar to learning judo, the first lesson the master teaches is damage control. Investors need to learn how to cut their losses, and often it means that they should sell the shares when they’re down 8% from their purchase price.

 

If the mathematics of stock investment is too complex for them, they should focus on Forex, because it’s simpler to predict the price of currencies. All they need is to establish a trading strategy and to collaborate with the best Forex brokers in USA and outside of it. Beginner investors find easier to earn revenue on the Forex market because when trading shares, they can easily miscalculate and lose everything.

 

Many investors have the misconception the stock market is similar to the grocery store they visit daily. If they are not well-versed in the stock market, they can lose all their savings from the first trade.

 

From the above scenarios they should learn to invest in companies that try to remain competitive on the market through the innovations they bring to their services. A business that lowers its prices to keep up with its competitors has great chances to register a revenue drop and in the price of the shares.

 

They should also understand that even a small event, like the one with Zion Williams, can influence the shares’ growth and if they don’t think the brand can come back from the hit it got, they should sell the shares before their prices drop below the purchase one.

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September 20th, 2019 by financetwitter

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