There are several options to consider in this market which include stocks that trend higher against the market, stocks that trend lower becoming undervalued, and gold option stocks. I will be looking at a few stocks that moved the market on Wednesday, August 3rd. I will try and determine if the news that moved the market was relevant and if continued gains can be expected. The first two stocks come from expiring companies that experienced large gains. The other two are companies who have seen considerable gains throughout the year, and are gaining in popularity as solid investments.
Research in Motion (RIMM) and OfficeMax (OMX) are both companies who at one time were amongst the best stocks in their respective industries. Research in Motion saw gains of 4.89% after unveiling its 5 new BlackBerrys which are set to go on sale in the coming weeks. OfficeMax saw gains over 10% during the last two days as a result of beating Wall Street's low expectations. Both companies have experienced a quick decline, with OfficeMax losing more than 80% of its total value in 5 years and RIMM losing over 55% this year.
Research in Motion unveiled 5 new BlackBerrys which are expected to be on sale in the coming weeks. Each device will be powered by the company's new operating system which will boost the speed of web browsing. The new Bold phone will be the thinnest yet and Torch devices will include a 3.7 inch screen, the largest yet.
RIMM has been horrible, as of late, about getting products out on time to be competitive. The Playbook was far behind the iPad and the new phones have been unable to hold ground against Apple (AAPL) and Android. I do not know if these new phones will bring RIMM back to prominence. But I do know they are getting a head start and that AT&T (T) has quickly announced their involvement with these new products. The new iPhone has not come out, which means BlackBerry is by itself to enjoy the spotlight. I expect the stock to see a significant increase in price because of these developments. Sales should be decent and carriers have begun selling older BlackBerry products for free or only $0.01. The company should benefit and release strong third quarter results along with decent guidance. It is impossible to know how long or how successful the products will be but the company should see short term immediate success from releasing its new products.
OfficeMax released earnings that beat low estimates. The market believed this news to be positive as the stock saw gains of 6%. I am confident this gain will be short lived as there is very little which indicates long term growth within this company. The company has decreased year over year revenue 14 out of the last 15 quarters. I cannot see any upside when revenue continues to decrease at a rate such as this. The company has been "late" in virtually every aspect of business, appearing to always get products later than competitors or announce deals behind the competition, such as its back to school season. The company has an EPS of only 0.64 and I wonder how long it will remain positive. I would only be interested in owning this stock if the company decided to close stores that are not profitable and focus on the strong areas of the business. The company is simply not the OfficeMax of old and they need to make substantial changes to the business in order to maintain long term profitability.
The second pair of companies come from the undervalued Financial sector. Both MasterCard (MA) and Visa (V) have seen strong growth along with encouraging developments during the last year. Each company has seen its stock price increase while trading in a similar fashion. On June 29 both stocks broke into new territory with the announcement that the Federal Reserve moved to cap debit-card transaction fees at 0.21. The companies are trading near all time highs with the future of both companies appearing very bright.
MasterCard saw gains over 13% on Wednesday after announcing strong quarterly earnings. The company's second quarter profit beat analyst expectations as net income rose 33% year over year. Looking at long term profit, this quarter marked the fifth consecutive quarter that profit increased by double figures year over year. Visa's profit surged by 40% and closed with more than 4.5% in gains. Both of these companies are demonstrating remarkable growth and profit. Profit margins for both companies have continued to increase which compliment revenue that is crushing all estimates from Wall Street. I see both companies as strong investments over the next several years. MasterCard has seen higher gains in stock price while Visa pays a better dividend yield. It's two companies growing in a similar fashion yet offering different rewards to investors. Either way both companies should continue to produce solid financial reports for years to come.
During this time of economic uncertainty stocks have been volatile at best. Gold has proven to be a good investment as fears of a recession have pushed gold into record settlements. The Dow Jones, Nasdaq, and S&P have all seen great losses during the last two weeks. Gold futures have seen gains over 3% since July 25th. Gold tends to trend higher with economic doubt as investors buy for its safety appeal. With several economic indicators showing a reason for fear, gold and gold stocks may be a safe investment for the immediate future.
The four stocks, along with gold, show a bright spot in an economy that is desperate for good news. Many of our markets recovered on Wednesday but investors still wonder how long it may last. I will be watching individual stocks throughout these tough times. There will be many opportunities to purchase stock at a cheap price. There will be many stocks that may not decline with the market if we fall further, such as gold stocks. The idea is to keep your eye open for value that may be rewarding when the market returns to normal. Depending on results, from the upcoming economic indicators, it may be a good time to buy gold, if it is not already a part of your portfolio.
Disclosure: I am long MA.