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Last week looked and felt like a bear trap, and, sure enough, the indexes have taken a beating early this week. In fact, the Dow Jones industrials ($INDU) broke through their low from last week in Wednesday's session, setting the stage for a near- to intermediate-term test of the 12,000 level.
Against such a backdrop, it's difficult to get excited about buying many stocks. Walt Disney (DIS, news, msgs) proved to be an exception, as the stock bounced back nicely on a very strong earnings report. Looks like recession or no, people will be taking vacations. With the dollar in the toilet, American consumers can't afford to go overseas, and foreigners see the U.S. as a bargain destination -- music to Mickey's big ears.
For every Disney that surprises to the upside, about 20 companies issue cautionary guidance. That steady stream of negative news, along with disturbingly weak economic data, is apt to keep the market on the defensive for at least another couple of weeks. So I will continue to buy in slowly.
One stock that I would like to add to my portfolio is Garmin (GRMN, news, msgs). If any company could navigate around the market's troubles, you'd think it would be Garmin. Seriously, this is a well-managed firm that didn't buckle to the pressure of the market and make an unnecessarily expensive acquisition a few months back. Consequently, this is a company with a rock-solid balance sheet, and that's always comforting in turbulent periods like these.
Garmin's sales growth is also expected to remain strong for the remainder of this year, as more and more consumers snap up its navigation devices for a couple of hundred bucks. Auto companies are also including the products in more and more cars.
With the stock off its high by 50% and nearing major support in the $60 area, I'll add 250 shares at today's open.
I'll also add 1,000 shares of Bebe Stores (BEBE, news, msgs) at the open. Bebe is a women's-clothing store that caters to a younger, fashion-forward audience. The stock has come down hard on disappointing same-store sales figures in recent quarters. Though sales are likely to remain under pressure for another couple of months, the stock is just too cheap to pass up -- especially given that it sits on a pile of cash. At about 10 times next year's earnings, Bebe is as cheap as it has been in years. Traditionally this has been a good (re-)entry point for long-term investors, and with the Fed slashing rates and Congress about to pass a major fiscal stimulus package, the worst of the spending downturn should be behind us.
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