Wal-Mart Dissapoints

Wal-Mart same store sales dropped a meager 0.1% this past quarter. However, that was the first time in 10 years that this occurred and is signalling to Wall St that the retail season is off to a slow start. That news sent stocks reeling with its worst one day drop in four months. The Dow fell 158 points, S&P was down 19 (1.36%). The Russell 2000 index was down a whopping 2.55%. Decliners led Advancers by a hefty 4-1 margin.

The dollar also continues to get punished and is now down to 20-month lows against the Euro at 1.3133 showing signs that foreign investors are sensing a slowdown in the US market and have started searching for opportunities abroad.

Retailers felt the most pain today based on Wal-Marts numbers. J Crew fell over 7% based on an analyst downgrade. However, that downgrade was based on the recent runnup and not on slow sales.

I wonder if the market has overblown the numbers released by Wal-Mart. Many retailers are reporting heavy traffic into their stores this past weekend. Now I realize that foot traffic does not always mean more sales, but there is a correlation. I expect that sales will be in line with forecasts and that the markets will recover from today's sell-off.

Two new positions to report. The first is MRV Communications- (MRVC). They design, manufacture and sell communication equipment and services. They have two division, networking (basically a small CISCO) and an optical components group. The company is just becoming profitable and is trading at a forward P/E of 33. The stock has jumped 85% in the past year which would normally knock this stock off my radar but with the prospects and fundamentals still ripe, I think its got some more upside movement to go.

It is trading at 2 times book value and has enough cash to cover debt three times over. Institutional buying has pushed Inst. ownership over 40% and I believe it will continue to rise pushing up the stock price.

The other position is EuroWeb International (EWEB). This is basically a liquidation, buyout and net-net play. It is trading around $2 a share, about have liquidation value. The CEO recently resigned and the company is basically switching its business model completely. We'll see how this new management team works out. In the meantime, they have been buying back stock and with 78% owned by insiders, is an excellant "going private" play. There are risks that the management team will simply soak up the cash but those are relatively low.

Recently they have gotten into Real Estate with 5 projects on the books. A couple of the projects are in Nevada- one such project is developing 296 condos in the Las Vegas area. This worries me since real estate in Las Vegas has been plummeting- one of the hardest hit markets in the country. Others are smaller projects such as a single family residence as well as 2 multi-family residences in the LA area. Ill keep you posted on what they get into next.

The portfolio was down 1.41% ($3,456.80), one of my worst days ever. Only the Dow Jones and S&P500 fared better, but only slightly.