News out of China regarding their PMI has world markets trading lower, and is causing a risk-off trade to permeate throughout the world. This should take stocks lower, but we still believe that individual stocks will see a 5-10% pullback and that this is simply a small pullback in a larger uptrend. We are purchasers on this weakness, adding to companies already in our portfolio and would recommend riding your winners. It is Jobs Thursday here in the US and the next few weeks should be interesting in that regard. We think hiring is not being held back by a lack of quantitative easing, but rather worries about what is going on in Washington (i.e., the fiscal cliff). That thesis will be tested in the next few weeks with our guess that hiring will not pick up.
We have economic news out today, and it is as follows (data set - consensus):
Initial Claims - 375K
Continuing Claims - 3293K
Philadelphia Fed - -4.0
Leading Indicators - 0.0%
Looking at Asian markets we see markets are mostly lower:
All Ordinaries - down 0.46%
Shanghai Composite - down 2.08%
Nikkei 225 - down 1.57%
NZSE 50 - up 0.17%
Seoul Composite - down 0.87%
In Europe markets are lower:
CAC 40 - down 0.96%
DAX - down 0.51%
FTSE 100 - down 0.61%
OSE - down 0.46%
Momentum is now on the side of Sirius XM (SIRI) shareholders. The stock continues its rebound and we are back up to the $2.50/share area after the stock closed at its highs in trading yesterday. The intraday charts from the past few days look really good here and if shares can trade above the $2.50/share level we think that the company should continue higher, however we still want readers to be aware of the potential downside here. With that said, it is hard not to like a company which has a stock rising along with rising volume.
Yesterday we discussed the need for investors to be careful with Clearwire (CLWR) shares and alluded to the fact that when all is said and done that the company may not control the network they have spent years and billions of dollars to build out. As it turns out Dan Hesse, the Chief Executive Officer of the company's largest shareholder, stated that he believes there will be further consolidation within the industry and although his company has indicated that Clearwire may not be a strategic asset investors still bid up shares. Shares in Clearwire rose $0.18 (13.09%) to close at $1.56/share on volume of 12.5 million shares.
Also rising on these comments was MetroPCS (PCS) which saw shares close at $11.30/share after rising $0.56 (5.21%) on volume of 16.1 million shares. Readers know that we are against buying stock in companies simply on takeover speculation, but we have to admit that this one has held up pretty well over the past few months. This strength has been helped of course by the constant rumors and speculation about possible takeovers in the industry but even we must admit that this scenario seems highly likely. We think that either the third largest player in the industry bulks up or others in the industry will merge to create a respectable fourth carrier nationally here in the United States. However we look at that, we see MetroPCS playing some part in the consolidation, but please, invest in this for operating purposes and not simply because you hope for an eventual takeover.
Bed, Bath & Beyond (BBBY) saw shares fall in the after hours session due to earnings which disappointed with their outlook. In after hours, shares fell $3.04 (4.42%) to last trade at $65.75/share after investors were made aware of the company's guidance for the next quarter. We are glad we did not take a position via options on this one, and decided not to recommend the play to investors, even with management's impeccable track record. With the housing market recovering however and the company closing an acquisition and consolidating operations we think that getting this train back on the track should not be too hard at this point. A few more weak quarters and it could be, but right now the brand does not seem damaged at all, just management's reputation and the company's stock price.
Volume exploded today on Regions Financial (RF) with 43.6 million shares traded yesterday as the stock rose $0.37 (5.08%) to close at $7.65/share. We were rather pleased to see that the company was very close to setting a new 52-week high yesterday and continues to trend higher. Based on recent events, we will probably have to update our price target for the company at some point in the next few weeks but our outlook for the company has not changed. We are still bullish and think that it will head higher, and with these lower rates from the US Fed, we can only assume that it will further help Regions as they switch from cost cutting mode to top line growth.