foxex: Hiring Fail

These lackluster moves are a bit surprising considering two data points that came to light today. First, the results of the recent Black-Friday through Cyber-Monday weekend broke all time highs with a 20% increase over last year's totals. Second, unemployment claims came in well below the forecast to notch the third lowest reading in the last four years.

Reading these two data points, one might expect to see a healthy consumer-driven economy powering stocks higher on such news. To be sure, the picture over a longer time frame looks exactly like that. However the close-up view may tell a different story. Consider the chart below which compares the S&P 500 with an equal-weighted portfolio of the top five seasonal-hiring companies in 2019, including Target (TGT), United Parcel Service (UPS), Macys (M), Kohls (KSS), and Amazon (AMZN). Since August when these companies began hiring, investors have remained unimpressed as the share prices lag the broad market average by ten percent in one quarter. Chart readers might be given to wonder if these companies may have over-recruited.

Social Media Companies Maintain Battle for User Attention

2020 figures to be a wild and woolly election year with the battle for political allegiance taking deliberate shape on the social media platforms first and foremost. With that in mind it might be prudent for investors to consider which companies appear to be having the most success in that arena. With Google (GOOG) controlling YouTube and Microsoft (MSFT) controlling LinkedIn, the four companies shown in the chart below are worth comparing. If market valuation is any indication of such things, this chart declares Facebook (FB) the winner and Twitter (TWTR) the loser.

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A Highly Paid CEO may Hurt Shareholders

Being overconfident and accepting overly optimistic sales projections thus leading to problems with over-staffed payrolls, is only one of the ways a CEO can mismanage a company's resources. Board members may understand that they take a risk when they agree to high compensation packages tied less to performance and stock price than simple salaries and bonuses, but shareholders seem to be even more aware of it.

Consider the following chart which compares the share performance of the companies that have the top ten highest-paid (not including stock and options) CEOs among publicly traded companies. This list includes J2 Communications (JCOM), Palo Alto Networks (PANW), Discovery Inc. (DISCA), Estee Lauder (EL), Tesla Motors (TSLA), T-Mobile (TMUS), Disney (DIS), PTC Inc. (PTC) and Oracle (ORCL) which has two entries on the list. To be sure these CEOs have had success most of us would dream of, however, while the average growth company has doubled in value over the past five years, these companies have lagged behind that performance.

The Bottom Line

Stocks inched higher on lackluster results despite great news from retail sales reports and reduced unemployment claims. Social media companies will battle for a stronger consumer base in the year to come, and companies with over-compensated CEOs may not perform so well if the past five years are any indication.