This morning Generac
(NYSE:GNRC) reported very strong results and raised its second-half outlook. From my perspective, few companies have benefited from the socionomics of weak social mood like this backup generator manufacturer. When mood is weak, we crave certainty and products that offer "just in case" local solutions -- like home generators.
Over the past three years, GNRC is up fourfold.
But just for fun, consider what has happened to the stock of what is arguably the most "just-in-time" global solutions provider out there -- FedEx
(NYSE:FDX). Over the same three-year period, that stock is up just 25%, and still below its peak-of-confidence 2007 high price of $121.
Social mood matters, and knowing where mood is headed can be a powerful advantage to investors.
So where do I think GNRC is headed from here?
While I am not involved in any way with GNRC, I always get nervous when companies up their outlooks. Positive extrapolation of performance is something you see at peaks in confidence -- by company managers, equity analysts, and investors. Given the universal praise I see by all this morning, I'd offer that caution may be best.
And in that regard, I'd note that over the past 12 months, we have seen the peaking of a lot of weak social mood "me, here, now" stocks, such as Sturm, Ruger & Co.
(NYSE:RGR), Cash America
(NYSE:CSH) and even Apple
(NASDAQ:AAPL) (with all its "i" -- as in, "me" -- products). And I think the same argument could be made for the peaking in high-dividend-paying mega-corporations too -- another weak social mood "bounce" trade.
To everything there is a season, and I would be cautious to assume that the "safety" trade can go on forever. Even more, I would encourage you to consider what happens to investor psyches should heretofore "safe" assets, like bonds, fall in price alongside supposed "unsafe" assets. The teeter-totter of "risk on" to "risk off" could quickly become a very one-sided "risk out" trade.
Peter Atwater's groundbreaking book "Moods and Markets" is now available on Amazon and Barnes & Noble.
“Peter Atwater brilliantly provides a framework for understanding both the socioeconomic hubris that led to the great credit bubble of the past decade and the dark social-psychological hangover that has resulted from its collapse. In so doing, he offers an invaluable guide to what promises to be a very difficult and turbulent period ahead as we experience what he calls the ‘me, here, and now’ behavioral tendencies of the post-crash world.” —Sherle R. Schwenninger, Director, Economic Growth Program, New America Foundation
No positions in stocks mentioned.
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