What Happened?
A number of stocks fell in the morning session after markets continued to decline, as investors grew cautious ahead of a key speech by Federal Reserve Chair Jerome Powell.
The move came as U.S. equity markets recorded a fifth consecutive day of losses for major indexes like the S&P 500, with technology stocks experiencing the largest declines. Investors have grown wary that the sharp rally in the tech sector since April may have advanced too far. The market-wide caution is largely driven by the upcoming Jackson Hole symposium, a meeting of central bankers, where traders are anxiously awaiting Fed Chair Powell's speech on Friday for guidance on the future path of interest rates.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Wireless, Cable and Satellite company Cable One (NYSE: CABO) fell 3.2%. Is now the time to buy Cable One? Access our full analysis report here, it’s free.
- Specialty Equipment Distributors company Alta (NYSE: ALTG) fell 3.4%. Is now the time to buy Alta? Access our full analysis report here, it’s free.
- Infrastructure Distributors company Watsco (NYSE: WSO) fell 3.9%. Is now the time to buy Watsco? Access our full analysis report here, it’s free.
- Boat & Marine Retailer company OneWater (NASDAQ: ONEW) fell 3.5%. Is now the time to buy OneWater? Access our full analysis report here, it’s free.
- Specialty Retail company Petco (NASDAQ: WOOF) fell 3.3%. Is now the time to buy Petco? Access our full analysis report here, it’s free.
Zooming In On Watsco (WSO)
Watsco’s shares are not very volatile and have only had 5 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The previous big move we wrote about was 22 days ago when the stock dropped 3.8% on the news that the company reported second-quarter results that fell short of analyst expectations for both revenue and earnings. The heating and air conditioning distributor posted second-quarter revenue of $2.06 billion, a 3.6% decline from the prior year and short of the $2.23 billion consensus estimate. Similarly, earnings per share of $4.52 missed analyst expectations of $4.80. The company attributed the sales decline to lower unit volumes, which stemmed from milder weather, a slowdown in homebuilding, and disruptions related to the industry's transition to A2L refrigerants. Sales of HVAC equipment, which made up 68% of total revenue, decreased by 6% during the quarter. While the company noted it achieved record gross profit margins, the overall miss on key metrics weighed on investor sentiment.
Watsco is down 14% since the beginning of the year, and at $403.30 per share, it is trading 29.1% below its 52-week high of $568.78 from November 2024. Investors who bought $1,000 worth of Watsco’s shares 5 years ago would now be looking at an investment worth $1,678.
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