Governor Romney appears to have defeated President Obama in last night's debate, and we were quite impressed by his performance. If we had been in a coma for the past 4 years and titles were not used last night, based purely on the debate we would have assumed that Romney and not Obama was the incumbent. The futures got a bump higher once the debate was over, but this morning we are right back to where we were. The next few weeks should be quite interesting and the market might be moving back and forth as expectations grow and wane regarding candidates' probability of getting elected.
We have economic news out today, it is as follows (data set - consensus).
- Challenger Job Cuts - N/A
- Initial Claims - 365K
- Continuing Claims - 3273K
- Factory Orders - -6.0%
- FOMC Minutes - N/A
Looking at Asian markets we see markets are mixed:
- All Ordinaries - up 0.31%
- Shanghai Composite - CLOSED
- Nikkei 225 - up 0.89%
- NZSE 50 - down 0.20%
- Seoul Composite - down 0.17%
In Europe markets are lower:
- CAC 40 - down 0.33%
- DAX - down 0.38%
- FTSE 100 - down 0.24%
- OSE - down 0.79%
Yesterday saw pressure applied to the weaker players in the personal computer industry after the negative announcement from one of Dell's (DELL) competitors. Investors pushed shares in Dell down in sympathy with shares closing at $9.43/share after falling $0.47 (4.75%) on volume of 34.2 million shares. The future is looking bleak, but so is the present as the shares hit a new 52-week low in trading. We are not interested in old tech, especially where the barriers to entry are low and the goods are essentially commoditized. The Chinese can make computers for less and falling prices coupled with short life cycles makes keeping inventory a nightmare. The weak players in this industry need to play catch-up with those who branched out in the services and consulting business which is where the real money is to be made.
We discussed Sirius XM (SIRI) back at the $2.50/share level and highlighted it as a stock which would move in the coming weeks. The stock moved lower before this larger move higher, and the catalyst has been the rumors that the FCC is prepared to listen to John Malone's case for why his holding company should be allowed to take control of Sirius. Investors believe that a handsome premium will be paid and more importantly that a deal will get done. Shares finished at $2.73/share after rising $0.11 (4.20%) as volume came in strongly at 92.6 million shares.
Rumors resurfaced that Best Buy's (BBY) founder and former CEO might be back for another go at taking the company private. We were correct to stay away from the buyout speculation the first time and we continue to think that it is the way to continue forward as the rumors continue. The stock only rose $0.79 (4.66%) to close at $17.76/share, so we believe that it is possible that Wall Street has grown tired of the charade already and gives little credibility to any buyout from the founder. In all honesty, the only reason one would be buying this stock long-term was for a buyout because the business is eroding and simply by going to the stores it is obvious that foot traffic is down and the customer experience has declined. Those are two things which never bode well for a retailer.
Whereas Best Buy is the epitome of a retailer you want to avoid, Home Depot (HD) is everything an investor could want for a retail investment. The company has been on a run now for over a year and yesterday hit a new 52-week high. Shares rose all day and actually finished $0.01 off of the day's highs so one has to like the strength here. This is a retailer doing nearly everything right because if you look at their rivals it is obvious that it is not an easy retailing climate in the home improvement sector. With the moves that the company has made it has helped results in the current, but should home improvement sales pick up to normalized rates we think that the company's margins would increase at a greater rate than some competitors. These guys are at the top of their game with a "lean, mean fighting machine" as the saying goes.
Sarepta Pharmaceuticals (SRPT) behaved like a penny stock yesterday as shares rose nearly 200%. The shares rose $29.94 to close at $44.93/share on volume of 27.9 million shares. The catalyst here was that the company announced results from a mid-stage trial for their muscular dystrophy treatment which demonstrated an ability to aid patients in walking further. Although the trial group was four patients, the results were stellar so we are interested in seeing how the drug performs in a larger test group. If this drug's results hold up, this would revolutionize how patients are treated and make life much more enjoyable for those affected by this disease. These are the medical breakthroughs which we love to read about, the ones where human ingenuity leads us to a way to enable everyone the opportunity to live a more normal and pain-free life. The market loved it, and so do we.