Markets in Asia were mixed today and looking to Europe we see lots of red. Yesterday US markets rallied into the close and showed considerable strength. We would like to point out to readers that we could see a rally in the tech sector as some fruit company is expected to release a new model of its popular tablet product shortly after lunch time here on the east coast. The techs have been battered recently with over a 10% pullback and it is around that level which we usually see a relief rally. We are not buying here as we are accumulating cash again, but would advise those who are buying to pay attention to the Fed, new tech products and the economic news due out later this week.
We will not have any economic news out today, the first set will be released tomorrow.
Looking at Asian markets we see markets are mixed:
All Ordinaries - up 0.07%
Shanghai Composite - down 0.86%
Nikkei 225 - up 0.04%
NZSE 50 - up 0.40%
Seoul Composite - down 0.76%
In Europe markets are lower:
CAC 40 - down 0.50%
DAX - down 0.94%
FTSE 100 - down 0.73%
OSE - down 0.81%
Shares in Vringo, Inc (VRNG) have been trending lower over the past few sessions and shares now find themselves about 20% above the level they were at prior to the big rally the shares had. Yesterday the shares fell $0.33 (8.40%) to close at $3.60/share, but we would point out that litigation can go anyway and with the stakes as high as they are, this is best viewed as a lottery ticket but with better odds. We could see this playing out in many ways, but based on our experience these things usually end up working themselves out with either a settlement announced before a verdict or an acquisition of the smaller company. It is a risky play, but one which we find quite interesting right now. We are spectators though, just to be clear.
After the close yesterday Texas Instruments (TXN) reported earnings which impressed us until we saw the forward guidance that the company gave. The revenue and earnings guidance was below analysts' estimates and further highlighted the growing trend we are seeing of revenue constraints now becoming earnings constraints. We have covered this in-depth here recently so we will not dive back into it, but this is a story which all investors need to watch and pay very careful attention to moving forward. For those keeping track, this is another tech giant reporting disappointing results.
There might not have been anyone more surprised than us regarding the news of SUPERVALU (SVU) which broke yesterday. Shares rallied sharply, rising $0.98 (44.75%) to close at $3.17/share with volume spiking to 58.6 million shares. It appears that they have a buyer for the entire company, and that the buyer will be a private equity player. Contrary to some of the comments we have heard, if this is an all cash deal it matters not who is the buyer (assuming they are able to obtain financing) but simply that they are buying and providing an exit for SVU's shareholders. We are going to stick to our guns here and recommend that readers do not try to trade this one on a buyout rumor. That was not prudent over the past few months and it is not prudent at this time still. If you want retail exposure, please look at some of our other recommendations of retailers who are near 52-week highs and reporting solid year-over-year sales growth with rising EPS figures.
News broke yesterday that the FDA had received a request to release any data they had on Monster Beverage (MNST) and any links between their product and deaths. This has been a constant issue for the company recently and many want their product to come under extra scrutiny to ensure safety for consumers. The news sent shares lower immediately and they finally closed at $45.73/share after falling $7.59 (14.23%) on volume of 21.8 million shares during the trading session. We are consumers of the company's products from time to time and at one time were quite heavy users of the product with no side effects. Mixing energy drinks with drugs and alcohol is known to cause issues, but it is not clear right now whether that is the case or not here. What investors are worried about is that there are more cases which might surface if people begin to search to connect the dots and the possibility that the negative publicity continues and this becomes a story which resurfaces every week or so.
The current quarter was already priced into the shares of Caterpillar (CAT) based on previous announcements that the company has made. Europe is probably the biggest hurdle moving forward and the biggest wild card as we see the US economy moving towards slow growth and China possibly getting ready to move towards a higher growth rate once they have new leadership come into power. Caterpillar shares rose $1.22 (1.45%) to close at $85.08/share on volume of 17.2 million shares during yesterday's trading. Although we do expect the company to face headwinds going forward, we tend to be in the camp which sees growth resuming worldwide sooner than many. Just like the company's management though, this depends upon Europe to a very large degree.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.