5 Stocks Seeing Heavy Volume Trading On Big News

By Christopher French - February 17, 2012 | Tickers: T, BAC, HAL, MS, NOK | 0 Comments

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I have identified the five most heavily traded NYSE stocks last week. Morgan Stanley (NYSE: MS) (as Facebook's new underwriter) and Halliburton (NYSE: HAL), due to a favorable ruling out of the BP-Macondo oil spill saw their share prices increase just as Bank of America (NYSE: BAC), which is restructuring itself, and Nokia (NYSE: NOK), and AT&T (NYSE: T) due to disappointing earnings, saw their prices decrease. In this article I will analyze these five stocks to see if they present an opportunity to investors at current prices.

Morgan Stanley continues to see buoyancy in its shares after reports that the investment bank will be the lead underwriter for Facebook. Volume last week ran at about 29 million shares per day. While these rumors are confirmed, shareholders can at least be excited that the company's name is being thrown around. In other news about which many investors are not aware, Morgan Stanley is being sued by Bayerische Landesbank and Dexia SA over $1.2 billion of residential mortgage-backed securities. This could amount to another headache for the company, and Morgan Stanley has not had any comment on the matter yet. Although the latest court case may not turn out to be a huge deal for Morgan Stanley, I would recommend investors put their hard-earned cash elsewhere. That doesn't mean Goldman Sachs (GS) either because that stock is trading for over 1.5 times the price to earnings ratio that Morgan Stanley is. Investors looking to make a play on investment banks should consider JPMorgan Chase. The stock offers a price to earnings ratio of 8.3, and by my estimates, has less unique risk than Morgan Stanley or Goldman Sachs. Although Morgan Stanley CEO James Gorman is doing a terrific job, Morgan Stanley stock seems slightly overvalued. While the stock pays a dividend yield of 2.7%, I believe shares should be avoided at current prices.

Nokia Corporation continued to see turbulence this week with 31 million in daily volume after a disappointing earnings report. The company lost the equivalent of $1.4 billion last quarter, although operating profit was actually greater than analysts were expecting. On the other hand, the numbers for devices sold are very weak. As seen in that article, Nokia experienced negative year-over-year growth in features phones sold, feature phone revenue, smartphones sold, and smartphone revenue. Nokia still has the greatest market share for total phones sold, however, but that's mostly because it sells tons of low-end devices. The reality of the situation is that Nokia has pretty much put everything on the line for its new Lumia phone, which runs on the Windows Phone operating system. That means Nokia could be a runaway success or a total bust going forward. The way I see it, the risk-reward characteristics for this stock do not match up well. The price to earnings ratio of 21 and price/earnings to growth ratio of 1.89 are simply too high. Investors looking to make a play in a European telecommunications equipment should prefer LM Ericsson (ERIC). The company has diversified its offerings out of the highly competitive phone industry, which is what helps to make it so valuable. A reasonable price to earnings ratio of 16.06 and price/earnings to growth ratio of 1.17 are show that the company is on track to grow earnings. I believe investors should avoid Nokia shares at current trading prices.

Halliburton Company continues to be positive this week on daily volume of over 18 million after Judge Carl Barbier ruled that Transocean (RIG) is not at fault for BP's (BP) Deepwater Horizon oil spill. While Halliburton wasn't directly involved in this ruling, it is certainly a good sign for the company, which some thought might also be held jointly and severally liable. The ruling is also good for Halliburton in the sense that similar situations in the future will likely work in Halliburton's favor legally. Last year, BP sued Haliburton in an effort to shed some liability, claiming that Haliburton hid cement tests that could have been reviewed further to prevent the spill. With or without the Transocean ruling, however, I think Halliburton is a solid investment. The company is now number one in servicing global natural gas production, and it is well positioned for well production and stimulation in liquids exploration, which figures to grow significantly through horizontal drilling techniques. Halliburton's North American operations continue to be quite lucrative, and business in Latin America is growing quickly. Additionally, Halliburton's value metrics are reasonable. The stock has a lower price to earnings ratio (12.05) than Baker Hughes (BHI) and Schlumberger (SLB), and price/earnings to growth (0.36) and price to sales (1.34) ratio are attractive as well. Investors considering Halliburton shares should also check out the company's recent earnings release. CEO Dave Lesar talked more about the company's North American plans, which remain the centerpiece of the current business strategy. At current share prices I would consider Halliburton a buy.

Bank of America Corporation has seen some volatility on 285 million in daily volume, and the latest news for this stock is some corporate restructuring. Most importantly, Christian Meissner is set to become chief of global corporate investment banking, and Paul Donofrio and Michael Rubinoff will get new roles. Bank of America's investment banking unit hasn't been doing too well, so this change could be one way the division plans to get things going again. Bank of America is also using headcount reduction to make the investment banking unit more efficient as part of the company's Project New BAC. In fact, that cost-cutting initiative has changed the form of some bankers' bonuses as well. While these changes are admirable, I cannot recommend paying over $7 for this stock. Out of the Big Four, also comprised of Citigroup (C), JPMorgan Chase (JPM), and Wells Fargo (WFC), I prefer JP Morgan Chase or Wells Fargo. Those companies have the best management teams, and Citigroup figures to have the most European exposure out of the bunch. At price to earnings ratios of 8.31 and 10.50 respectively, JPMorgan Chase and Wells Fargo are both reasonably priced right now. Dividend investors should naturally prefer JPMorgan Chase since that stock offers a dividend yield of 2.7%. With many other profitable options out there, I believe investors should avoid Bank of America shares for now.

AT&T Inc. continues to see weakness on daily volume of 27 million as the company just reported a loss of $6.7 billion for the fourth quarter. Much of that loss was associated with fees from the failed T-Mobile USA acquisition though, and adjusted earnings per share were only one cent lower than analyst expectations. In fact, AT&T actually beat analyst expectations for revenue due to new subscribers and increased iPhone sales. Those iPhone sales lowered AT&T's margins, however, because of the massive subsidies that the company uses. Regardless, CEO Randall Stephenson had this to say: "The customer that you hold with a smartphone, you will also sell a tablet, a connected device, a home monitoring service. I really believe it's become a platform in terms of further penetration of mobile data." With a dividend yield of 6%, buying this stock is a no-brainer. In fact, I expect AT&T to keep increasing its dividends as customers slow down their upgrades a bit. AT&T's plan is essentially to subsidize upgrades now and then make the money back once customers use more data on their new smartphones. I believe this business strategy is forward thinking, and see AT&T stock as a buy at current price levels.

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