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This is The Takeaway from today’s Morning Brief, which you can sign up to receive in your inbox every morning along with:
Welcome to silly season in the markets.
I loosely define the silly season as a few days before a major holiday, where markets are infiltrated by holiday vibes (aka low volume) and minor moves in stocks seem like a big deal… but often aren’t. One news story plastered top of the fold (for you young investors, this is the main story on page one of a newspaper or the very top of a website) like it could drive stocks, or a stock, for the next year.
That is 99.99% of the time not the case, and it usually ends badly for an investor.
Now is the time to be extra skeptical on anything that is being played up as a fresh market narrative or something big — good or bad — for markets. Challenge everything being thrown at you!
But also use these precious moments ahead of Thanksgiving to perform due diligence on companies that maybe you weren’t even thinking about as potential buys.
I am giving out early presents this year by serving up two names to research. Please note two things, however.
One, these aren’t stock picks. I no longer do that; I did so in a previous life. These are simply guides. And two, both of these companies have been fundamentally through the ringer in the past two years. That makes them what Wall Street calls potential turnaround stories.
Good luck and happy investing!
Intel
The chip giant has had a tumultuous stretch, highlighted by losing server market shares to AMD, a costly strategy shift into building chips for others, major investments to bring back chip leadership, and a post-COVID PC demand slump.
Several aspects of the Intel story have caught my attention as of late though.
First is the price action. Intel’s stock is up 64% year to date, outperforming the heady 35% advance for the Nasdaq Composite. This comes despite continued top and bottom line pressure for Intel. To me, Mr. Market is positioning ahead of a rebound in 2024 results.
That brings me to point No. 2.
Intel’s product line next year is poised to be vastly improved as its investments begin to pay off. The start of AI centric computers sales is also important for 2024 profits and beyond. An upgrade out of Mizuho on these very factors last week was one of the first of its kind I have seen on Intel in months.
It fits with the bullish tone of Intel CEO Pat Gelsinger when we talked a few weeks back (video above) — with Gelsinger calling out a brewing Intel comeback.
His tone in our interview was a positive shift relative to when we spoke in prior periods, and left an impression.
The next catalyst for Intel’s stock you ask? Be on the ready for positive developments from an AI-related event being held in NYC in mid-December.
Gap
Full stop: In 2012 when I was an analyst I said Gap was “dead.” I have stayed true to that ever since by reporting on the company’s numerous challenges. Awful products. A revolving door of leadership. Terrible execution. No accountability for poor results. Awful. Awful. Awful. I just want to walk into a Gap store and leave knowing a size medium shirt doesn’t fit like a large.
Or not walk into a Banana Republic and find a shirt that should be priced at $50 selling for double that. And hey, exactly why isn’t going to Athleta as amazing an experience as Lululemon?
I am not going to sit here today and say 2024 will be smooth sailing for a company that has been as challenged as Gap has been for the past decade. Besides operational considerations, the economic backdrop is such that apparel retailers may have sales pressures well into the next year. That was on display in Gap’s latest earnings reported last week.
What I will say though is this: Don’t underestimate the power one leader can have at a company yearning for a great leader. In this instance, that is new Gap CEO Richard Dickson. I originally got to know Dickson — appointed the top spot in July — from his epic turnaround of Mattel’s Barbie line. I was able to spend some time with him at Gap’s NYC headquarters a couple weeks ago.
I came away impressed by how deeply he is thinking about performance improvement — right down to what you first see when you open up Gap’s homepage.
Dickson has a lot of work ahead of him to fix Gap. I foresee more store closures and management changes. But this is arguably the first Gap CEO since Mickey Drexler who knows what they are doing and how to get to some form of promised land. Expect to learn more on Dickson’s turnaround plan by mid 2024, likely at an investor day.
Fun fact: Gap’s stock is up 59% year to date, with a 30% gain alone on Friday post-earnings… in part because Dickson nailed the conference call.
Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email [email protected].
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