This week, another Chinese company came under scrutiny as possibly perpetrating fraud on its shareholders. Toronto-listed and China-based Sino Forest is under investigation by the Ontario Securities Commission (the SEC’s Canadian counterpart), after a report released by research firm Muddy Waters, accused Sino Forest of “aggressively committing fraud since its RTO in 1995.” The allegations in the Muddy Waters report have been refuted by Sino Forest, but the market smells a rat. Sino’s shares have cratered over 73.3% since the report was released. And we aren’t talking about a penny stock here. … [Read more...]
Apparel Stores Hit Hard by Rising Costs
This week’s Market Mover is an entire industry, apparel stores. In the past week stock prices of many apparel stores like Gap (NYSE:GPS), Pacific Sunwear of California (NASDAQ:PSUN), Aeropostale (NYSE:ARO), and New York & Company Inc. (NYSE:NWY) have fallen by more than 5% (Chart 1). With a combination of high raw materials costs for clothing inputs like cotton and rayon still elevated and continuing weak customer demand, the apparel industry is in a vice. While prices for cotton have come down, they are still well above prices of a year ago. Americans are buying less, as their real wages … [Read more...]
Kentucky Derby Owner Hits 52-Week High
This year a record-breaking 164,858 people attended the 137th running of the Kentucky Derby, breaking a 37 year record. The race was watched by an additional 14.5 million people on television. The stock price of the Derby owner, Churchill Downs Inc. jumped to a new 52-week high on the news, and in response to an earnings report that showcased strong revenues from a number of recent acquisitions. Shares of Churchill Downs (NASDAQ: CHDN) climbed to $45.08 on May 12. The acquisitions helped boost the results at Churchill Downs. To diversify away from horse racing, a seasonal industry, … [Read more...]
Coal, an Export Story
Over the past year U.S. exports of metallurgical coal (met-coal) have nearly doubled in dollar terms. Increased trade of metallurgical coal, used in the steelmaking process, has led to consolidation in the coal mining industry as major players scale-up to meet the demands of globalized competition. Toward that end, Arch Coal (NYSE:ACI) announced a deal to buy International Coal Group (NYSE:ICO) on May 2, pushing ICO’s price up 32.23% last week, making it this week’s Market Mover. Arch Coal’s management estimates that world steel consumption will increase by 60% over the next decade, and … [Read more...]
Bottom Fishing the Stock Market
Markets are bullish, as new highs on the NYSE, AMEX, and NASDAQ outpaced news lows by 8 to 1 last week. A total of 1,109 new highs were recorded, compared to only 137 new lows. Investors should thoroughly examine any stocks trading at new lows in this market. There are probably some hidden gems, but beware stocks of companies whose industries are structural quagmires. One company getting hit by a double whammy of structural changes is newspaper publisher Lee Enterprises (NYSE:LEE). The publisher owns dozens of newspapers with a total Sunday circulation of 1.65 million. Its most notable … [Read more...]
Low Fliers
The airline industry has predictably been hit hard by recently elevated oil prices. AMR and Delta Air, along with jet leasing company Air Lease all hit 52 week lows last week. Jet fuel alone could represent 40% of airlines’ operating costs when oil prices are above $100/barrel. Jet fuel kerosene closed at a price of $3.3067/gallon last Thursday. According to airline industry group, IATA, sustained high fuel prices will drive a decline in airline industry profits of nearly 46% in 2011. IATA reports that “In this economic environment business travel and air freight demand will be more robust … [Read more...]
Investors Flock to Consumer Staples
Hitting new highs last week were a number of consumer non-cyclical (staples) stocks. Household names, including Kraft, Coca-Cola, JM Smucker, HJ Heinz, Unilever, and Hershey all made the new highs list. Meanwhile the major market averages have failed to regain their February peaks and show signs of breaking down. The quantitative easing trade appears to be waning. We are seeing early indicators of a flight to safety. The high beta cyclical stocks are underperforming the market. Non-cyclical stocks are now in favor. The S&P 500 Consumer Staples index has recently broken out of a … [Read more...]
Chinese Fraud: Tip of the Iceberg?
Welcome to the first post in our new Stock Market Movers column. This new area of the website will focus on explaining and analyzing some of the market’s best and worst performing stocks. The focus will be on stocks reaching 52 week highs and lows, and those with extreme short term price changes. Below you’ll find the first addition to this new column, a review of a much lauded Chinese water industry company. Hitting a new low last week, was China based Duoyuan Global Water. The one-time high flying Chinese water play, closed at $3.11 yesterday, 86% below its $22.65 June 2009 IPO … [Read more...]