The market has had two down days after the nice bump up we got from the Fed and QE3 and the futures indicate that we are headed marginally higher today. Technology has lagged the commodity sector during this bounce, so we want to have readers allocate more capital towards technology names and have included one name in today's article which we want readers to buy - and yes, it is a complete reversal from our previous thinking on the company. Investors should also watch Bed, Bath & Beyond which we talk about as they report earnings after the close. Their report should give us a hint as to how strong the consumer really is and whether the last few months have emboldened the consumer in the US to go out and spend more on their homes.
We have economic news out today, and it is as follows (data set - consensus):
MBA Mortgage Index - N/A
Housing Starts - 770K
Building Permits - 800K
Existing Home Sales - 4.58M
Crude Inventories - N/A
Looking at Asian markets we see markets are mostly higher:
All Ordinaries - up 0.51%
Shanghai Composite - up 0.40%
Nikkei 225 - up 1.19%
NZSE 50 - down 0.17%
Seoul Composite - up 0.15%
In Europe markets are mostly higher at this point:
CAC 40 - up 0.03%
DAX - down 0.09%
FTSE 100 - up 0.07%
OSE - up 0.58%
We have been watching Sirius XM (SIRI) very closely over the past few days, and have watched as volatility finally increased after shares had pretty much been pegged at $2.50/share. We saw shares get down to the low $2.30s before bouncing back and closing positively for the day. Volume spiked to 97.4 million shares as investors pushed the stock higher by $0.04 (1.67%) to close at $2.43/share. The story is the big reversal and the fact that the shares finished above the $2.40/share level we have discussed. We continue to watch this one and should it remain above $2.40 we could see a 5-10% move higher, however breaking down below that level could results in a drop back towards the $2.25/share level.
We have been pretty tough in regards to OCZ Technology (OCZ) and their ability to operate the business and investing in the company hoping for a buyout. Today we are going to reverse course and actually switch to the bullish side of the trade. So although the shares are not at their 52-week low, they are pretty darn close and after having fallen $0.33 (7.40%) to close at $4.13/share yesterday we think that the shares are a good speculation here. The shares fell as the company's CEO resigned, and although he was one of the company's founders we believe that this opens up many avenues for the company moving forward. First it does in fact make the company more susceptible to a buyout offer, however that is not what we are most interested in but rather the fact that OCZ can now bring in a proven operations manager and solve the supply chain issues. With the technology here and the possibility of a bounce with the company hiring a proven supply chain manager we think that this is a decent speculation at these prices.
It has been nothing but bad news for Clearwire (CLWR) since the company saw its shares double earlier this year. With news that another large shareholder will be exiting their position soon, shares closed at $1.38/share after trading down $0.16 (10.39%) on volume of 13.8 million shares. One thing is for certain here, and that is that someone is going to make money off of this network but the big question is going to be who that is. As time goes on, it seems that Clearwire has fewer options moving forward and ultimately it seems that the company will either be folded into its largest shareholder or sold off in bankruptcy court to the highest bidder. For those long here, we would maintain a very tight leash going forward. The company has roughly a year with their cash position but problems will be obvious long before then, so pay attention.
Earnings will be out after the close today on Bed, Bath & Beyond (BBBY) and the market is mixed on its feelings toward how this report will turn out. It is a bit odd to us to be writing this as the company has consistently outperformed markets and always seemed to meet or exceed its numbers, but that changed last quarter which is the problem. The guidance was lowered for the rest of the year and that is impacting investors' thoughts about this quarter. We feel that the company will either come in either at or just above estimates but our conviction is not high enough to pull the trigger on our options trade, so we shall not recommend action for our readers but rather leave that to them.
The diet drug biotechnology plays came alive today with Arena Pharmaceuticals (ARNA) rising $0.64 (7.42%) to close at $9.26/share on volume of 14.4 million shares. There is a lot of news coming out this week regarding biotechs as some readers may have already noticed, but in the current market with the move yesterday and the close near the highs, we think that there is a possibility that Arena Pharmaceuticals may make a run at $10/share again. As readers know, we chose Arena as our winner in the sector and that has thus far turned out well for those who listened. We still believe that Arena can achieve $15/share by the end of the year.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in OCZ over the next 72 hours.