How to Play Tuesday's Market Leaders
Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
What’s moving, why’s it moving, and why is it important? In a market that is now sitting at multi-year highs, and is fast-approaching all-time highs, I am looking at the market’s biggest intraday movers to determine if any additional upside may exist.
*As of 2:35 ET
Research in Motion
Research in Motion added to its six month gains of 160% after the company’s CEO Thorsten Heins suggested a possible hardware sale in an interview over the weekend. However, the double digit move was also driven by a combination of events including the interview, new BB10 leaks, and an upgrade to Sector Outperform from Scotia Capital. Yet despite these large gains, I continue to urge investors to be careful, as such large gains can often be intoxicating to investors. There is simply no fundamental reason to believe the new BB10 operating system will be a success, and I wouldn’t be surprised to see a “sell on the news” event.
In an article on Friday I suggested Regions Financial as an investment ahead of earnings, due to strong industry-wide performance for the regional banks. Turns out I was right, Regions rallied after posting strong bottom line earnings. However, while the company’s earnings were strong, its revenue was flat during a quarter when almost all banks saw double digit growth. Therefore, despite it being undervalued I do think there are better values such as BB&T Corporation, Huntington Bancshares, or PNC, as all of these companies are seeing substantial top-line growth.
After months of speculation following two major acquisitions, Freeport McMoRan posted an incredible quarter where it beat both top and bottom line expectations. In the process, the company announced a partial acquisition of OM Group’s advanced materials business and issued strong guidance for copper in 2013; volume growth of 20% this year! Therefore, it looks as though recent acquisitions were nothing more than to strategically growth and better position the company. As a result, with a forward P/E ratio of just 7.77 I think FCX is a screaming “buy,” and is a stock that should receive a number of upgrades in the coming weeks.
Shares of Western Digital rallied considerably higher after announcing that it recently bought Arkeia, a provider of storage backup software and VMware backup appliances for SMBs. Now, there is a belief that the company can directly compete with Seagate Technologies’ EVault product line, and also helps the company lower its dependence on PCs. I think this is a big win for the company and despite it, and Seagate, now trading at new highs I think both are a “buy” with forward P/E ratios under 7.0.
After a recent selloff, shares of Facebook rallied higher thanks to a report by ITG Research that said that its checks indicate North American Q4 sales between $780 and $800 million; above the consensus. Furthermore, Oppenheimer reported that mobile usage rose 15% in December over November which indicates that mobile ads have not hurt engagement. I think this is a great sign that Facebook is effectively monetizing its business and it finally on the right track for consistent growth. However, I have gone back-and-forth with Facebook depending on valuation, and although I think it could rise to $34, I still think a price/sales of almost 14.0 is too expensive.
These stocks all moved on Tuesday thanks to substantial company changing news; and this news could possibly lead to multi-day rallies. Therefore, I believe additional due diligence is required to determine if any fit into your investment goals, and if so, then you might find gains in one of these five market movers.
BrianNichols has no position in any stocks mentioned. The Motley Fool recommends Facebook. The Motley Fool owns shares of Facebook, Freeport-McMoRan Copper & Gold, and Western Digital.. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!