Posted by: Ben Steverman on May 13
Rising energy prices are stressing out U.S. commuters and businesses, and that can't help but concern Wall Street, too.
But as I wrote here, the relationship between the price of oil and the price of stocks is anything but simple. Oil hit another record today but stocks barely budged.
Below are three more observations about oil and stocks. I’d love to here your thoughts:
1. If you're looking for evidence oil's surge is the result of a speculative bubble, look at the astronomical trading statistics on energy exchanges. Bill Stone, PNC's chief investment strategist, notes today that the average daily trading volume in energy futures so far this year is $138.3 billion. That's a 61.6% increase from 2007 and a 3,000% increase from 1997.
I would note that much of this increase might be the result of technology rather than evidence of a bubble: Sophisticated computerized trading systems make it much easier to try to squeeze out extra profits by buying and selling contracts rapidly throughout the day.
2. Are worries about an oil bubble scaring short sellers away from stocks? This is hard to prove, but it seems plausible.
If the price of oil collapses suddenly, that could give stocks a big boost, particularly consumer companies. The only caveat: For that collapse to help stocks, it must be the result of a speculative bubble bursting, not the result of a slowdown in global economic growth. A global depression would hurt demand for oil and cause prices to drop, but nobody wants that to happen.
3. No one really knows where oil prices are going. S&P's MarketScope quoted one trader saying: "There is a strong uptrend in this market and prices won't come down until that trend is broken." Gee, thanks. In other words, prices will go up until they stop going up. I'm not sure how helpful technical analysis is at a time like this.
Posted by: Ben Steverman on May 12
Ouch. Of all the insults newspaper stocks have had to put up with in the past year or two, this might be the most cutting.
The Sun-Times Media Group (SVN) is being kicked off the New York Stock Exchange.
Among the problems for the publisher of the Chicago Sun-Times and several other papers in the Chicago area, the NYSE says: For more than a month the Sun-Times Media Group's market capitalization has languished under $75 million while its shares have traded under $1.
Also, "the Company informed the NYSE that it does not expect to submit a business plan to bring it into conformity with continued listing standards." The company CEO says the delisting doesn't affect "the way we conduct our business" nor its plans "to explore strategic alternatives for the company."
To say the least, the market seems skeptical of the Sun Times' ability to find a buyer. Trading at 40 cents, Sun-Times shares have plunged 93% in the past year.
Compare the Sun-Times' market value of $75 million to the $650 million that Cablevision (CVC) will pay for suburban New York City newspaper Newsday, owned by the Tribune Company. (Rupert Murdoch's News Corp. reportedly offered $580 million but withdrew its bid over the weekend.)
BusinessWeek colleague Joe Weber wrote about the Sun Times' plight in the April print edition of BW Chicago , which can be accessed here.
Like other newspaper companies, the Sun-Times faces declining advertising revenue. But in addition, the Sun Times must deal with the legacy of the ownership of Conrad Black (recently convicted for his crimes), the fallout from a circulation scandal (which also hit Newsday), and a tough competitive position as the number two paper to the Chicago Tribune.
The Sun-Times' best but fading hope is a deep-pocketed buyer, a company like News Corp. or Cablevision betting that the decline of the newspaper business is a temporary rough patch rather than a long slide toward extinction.
Posted by: Ben Steverman on May 12
In my new story and slideshow today, BusinessWeek asked fund managers and other stock market gurus to recommend stocks they think could double in the next couple years.
As I say in the article, it's a tough task: Less than 100 stocks -- out of almost 6,700 that trade on major U.S. exchanges -- succeeded in doubling in the past year, according to data provider Capital IQ. (Capital IQ, like BusinessWeek is a unit of the McGraw-Hill Companies.)
Who are these overachievers?
None are part of the Dow Jones Industrial Average. Only two are established enough to be in the S&P 500 -- Monsanto (MON) and CONSOL Energy (CNX).
Looking only at firms on the Nasdaq and New York Stock Exchange, 81 have doubled in the past year.
Many, but not all, are small. Despite doubling, 29 firms, or more than a third, still have market capitalizations of less than $500 million.
There are some obvious trends -- oil, gas, coal, biotech, and fertilizer stocks were hot. But there are also some interesting oddballs. I didn't know that packaged foods and meats firm Synutra International (SYUT) had given investors a 140% return in the past year. Nor that Rick's Cabaret International (RICK), operator of (ahem) "adult leisure facilities," had doubled its still-tiny $180 million market cap in the past year.
The sheer diversity of the list is evidence of how difficult it is to spot winning stocks beforehand.
Below the jump, the full list of Nasdaq- and NYSE-listed stocks that have doubled in the past year.
Continue reading "Stocks that doubled"
Posted by: Howard Silverblatt on May 09
While there is no insurance on any charged or slimed down bets, there is a chance that the Financials could post negative earnings this quarter, which would be their second in a row.
Energy, which now represents 14.3% of the market value of the S&P 500 (a record high), accounts for 24.8% of the Q1 operating earnings, compared to 13.6% for Q1 2007 (10.09% of the market value); Financials contributed 29.65% last year (21.63% of the value then, 16.74% now). I've had to add digits to my formula when calculating future growth rates.
As far as the neck-n-neck heated public current race goes, it appears that we are near an end, but it’s not over yet. Currently milk is selling for $3.89 a gallon vs. $3.61 a gallon for regular gas. While Oil has the momentum, $126.20 high set today, Milk's got that $4 finish line in site.
Posted by: Ben Steverman on May 08
Crocs (CROX), the maker of ugly, comfortable and wildly popular shoes, saw its share price jump 14.5% Thursday after reporting earnings. However, Crocs shares are still 84% off its Oct. 31 high.
It's a classic tale of stock market hubris, one that has been repeated many times. The stock fell from a high of 74.75 to a low of 9.63 in late April, when it finally was clear to many, many investors that Crocs was another Krispy Kreme (KKD) or Snapple -- a fad stock that fizzled.
Some skeptical takes on Crocs are here and here, and a more balanced take from Robert Walberg is here.
To me, Crocs fit the mold of a fad or 'story stock' perfectly, as I wrote last November here and here. Yes, Crocs could be -- as its supporters insist -- the next Nike (NKE). But, as is now clear, it was also the subject of a ridiculous amount of stock market hype. The stock tripled in the first ten months of 2007.
One of the most disturbing things about Crocs' wild ride has been the lack of skepticism from analysts. Almost all of Crocs' analysts bought into its growth story and encouraged clients to buy more shares, even after the stock's collapse in November. Even now, none of Crocs' nine analysts have a 'sell' rating on the stock, and three have a buy (or outperform) rating.
With the stock at such a low level, they might be right. (Thursday's spike showed the stock still has some buyers.) But these analysts' track record leaves something to be desired.
