Last week, the S&P 500 rose 1.7%, which was its biggest gain in five weeks. More notably, it was the seventh consecutive week that the market rose, matching a streak that was last seen in May 2007. The bulls are in control and the Wall Street bears are in permanent hibernation along with the ones in the woods. Everything is right in the world for those long the market. Of course, contrarians will tell you that is the time to worry the most, and shareholders of this company can tell you firsthand what can happen in the blink of an eye.
Down the Drain
Coinstar (CSTR) was a high flyer that more than doubled since last February on the strength of their coin and dvd kiosks mostly in supermarkets. Everything was going right for the company and earnings were growing strongly. In fact, it crushed estimates to the tune of a 28.1% average over the past four quarters. Unfortunately for shareholders, the ride took a painful turn and hit a brick wall last week. The stock plunged 27% after it said profits and sales for the fourth quarter will fall short due to disappointing action in its RedBox rental kiosks.
Why Do I Bring This Up?
I’m not saying that Coinstar has anything to do with the broader market or is any harbinger of doom. However, it does bring up the point that there is a long way down when a high-flying stock misses a step. Months, and in some cases, years of gains can be wiped out in a single day when a stock implodes. Earnings season is here and there will be more companies that get taken behind the woodshed and shot.
With expectations high and the market riding a huge winning streak, the potential for disappointment is large, especially among smaller cap stocks. I mentioned in my 2011 predictions that large caps would outperform small caps and I am sticking by that. I expect earnings to be strong, but there will be landmines like Coinstar that will take down many months of gains and a few investors with them.
Are There Landmines Lurking in the Market? is an article from: 
