Day 108: Blame the Bunny?


The Mother's Little Helper portfolio was down today (-0.60%) for a loss of -$4,072.64. Overall gain to date: +$85,797.01 (+14.69%). According to CNN Money the S&P 500 is up +4.03% Year To Date.

Corporate earnings season is upon us and we're learning that many companies, major banks in particular are doing well, earnings are up. Normally this news would cause stocks in these companies to surge, but today we also learned that the US dropped the largest non-nuclear bomb in our arsenal on a site in Afghanistan. Should an attack in a remote area of a remote country have any effect on your investments, well yes, because one of the biggest drivers of the markets is uncertainty. Lately the markets have been delivered a heavy dose of uncertainty; new national healthcare plan (not yet), new tax plan (be patient), China is a currency manipulator (well not right now), Russia might be our friend, "I can work with Putin" (Maybe not so much), we're pretty much done with Afghanistan (nope!). RBC analysts stated that the chances of Apple buying Disney is, "greater than zero" (when pigs fly). And if you enjoy sitting up late and reading the text of corporate earnings calls like I do you'll find yet another bit of uncertainty that is being waved like a white flag to explain less than stellar earnings. That's right, you guessed it, Easter.

Easter is a holiday that does not occur on the same date every year. In 325CE the Council of Nicaea established that Easter would be held on the first Sunday after the first full moon occurring on or after the vernal equinox. In the Gregorian calendar, Easter falls on a Sunday between March 22 and April 25 from 1753 to 2400. Put a reminder in your Google Calendar, this is only good until the year 2400. Y2.4K ? The implication is that earnings due to Easter spending may be recognized in a different quarter from one year to the next causing an "Easter Shift" for earnings. Bad bunny.

Some of the companies reporting declines due to the Easter shift is a bit ironic. Expedia and Hotels.com report decelerating earnings due to the Easter Shift. Apparel sales in general report a decline due to the Easter Shift, including L Brands, parent company of Victoria's Secret, not sure about the Easter connection there. Troubled grocery store chain Whole Foods is forecasting additional declines of up to 115 basis points in the 2nd and 4th quarters due in part to the negative Easter Shift. Don't they sell ham? Disney states that they may lose $50 million in operating income due to the Easter shift, apparently Disney parks hold Easter themed events so guests wait to attend these egg-travaganzas. And while we may think of Easter as a holiday with great religious significance it's also one of the biggest holidays for purveyors of alcohol. Companies like Molson Coors and Constellation Brands expect to see a big bump in earnings, next quarter, especially for spirits, apparently Easter is not a beer holiday.

So the next time your plotting out your portfolio and inserting all the events for the year that can impact your stocks (yeah I kind of do that), don't forget the bunny, for the Easter Shift can shift earnings from one quarter to the next, maybe enough so that a buying opportunity presents itself.

Stay Invested,

Clay Baker

Disclosure: I am personally invested long in these stocks that appear in the MLH portfolio and may purchase or sell share withing the next 72 hours. I am also invested in other stocks that do not appear in the MLH portfolio: BA, BRK.B, CELG, CSCO, CTXS, CVX, DOW, DVAX, FB, IBM, NTES, NVDA, OMER, PFE, PG, RDHL, SCHW, THO, TWX, VEEV, VZ, XLNX, XOM

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

This article is not intended to offer investing advice, guarantee 100% accurate predictions, or to be interpreted as providing a personal recommendation.

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This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice.
This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities.

© 2016 by Clay Baker all rights reserved