Post Market Update
Seth Klarman: Investors Can No Longer Rely On Mean Reversion
"For most of the last century," Seth Klarman noted in his second-quarter letter to Baupost's investors, "a reasonable approach to assessing a company's future prospects was to expect mean reversion." He went on to explain that fluctuations in business performance were largely cyclical, and investors could profit from this buying low and selling high. Also Read More
* US: Dow: 12835.10 (-0.75%), S&P 500: 1354.58 (-0.67%), NASDAQ: 2934.71 (-0.39%)
* Europe: CAC: 3118.65 (-0.20%), DAX: 6475.31 (0.47%), FTSE: 5530.05 (-0.44%).
* Asia-Pacific: Australia: 4275.10 (-0.91%), China: 2408.59 (-1.67%), Hong Kong: 20330.64 (-0.76%), India: 4974.80 (-0.50%), Japan: 9045.06 (-1.51%).
* Metals: Gold: 1594.20 (-0.64%), Silver: 29.24 (-0.74%), Copper: 3.66 (-0.49%)
* Energy: Crude Oil: 96.81 (-0.21%), Natural Gas: 2.46 (3.01%)
* Commodities: Corn: 6.07 (-2.53%), Soya Bean: 13.33 (-0.52%), Wheat: 6.00 (-2.44%)
* Currency: Euro (€) / US Dollar ($) (EURUSD): 1.2938 (0.48%), British Pound Sterling (UK£) / US Dollar ($) (GBPUSD): 1.6136 (0.12%), US Dollar ($) / Japanese Yen (¥) (USDJPY): 79.6150 (-0.33%)
* 10 year US Treasury: 1.823% (-0.017)
Market and Economy News Update
U.S. markets end lower: Markets recovered more than half their losses throughout the session, but still ended lower on Wednesday following news that Greece will receive another bailout payment. The Dow Jones Industrial Average (INDEXDJX:.DJI) fell for the sixth consecutive session, down 0.75 percent, to end at 12,835.06. The S&P 500 (INDEXSP:.INX) slid 0.67 percent, to finish at 1,354.58, while the NASDAQ Composite (INDEXNASDAQ:.IXIC) lost 0.39 percent, to close at2,934.71.
Oil prices fall for the sixth day: Oil prices fell for the sixth consecutive day following data that showed U.S. crude stockpiles increased for the seventh straight week. U.S. crude oil inventories increased 3.65 million barrels to 379.5 million, the highest level since August 1990. Crude oil for June delivery fell 0.2 percent, to settle at $96.81 a barrel on the New York Mercantile Exchange. Brent oil for June settlement rose 0.1 percent, to $112.85 a barrel on the London-based ICE Futures Europe exchange.
Company News Update
* Cisco Systems, Inc. (NASDAQ:CSCO) reported fiscal third quarter earnings of $2.2 billion, or 40 cents a share, on revenue of $11.6 billion, with Non-GAAP earnings at 48 cents a share, topping analysts’ estimate of earnings of 47 cents a share on revenue of $11.59 billion.
* Priceline.com Inc (NASDAQ:PCLN), the biggest US online travel agency by market value, said first quarter profit stood at $182 million, or $3.54 a share, up from $104.8 million or $2.05 a share, in the year ago period, but forecast second quarter profit that trailed analysts’ estimates.
* Monster Beverage Corp (NASDAQ:MNST) posted first quarter earnings of 41 cents a share on revenue of $455 million, compared to street estimate of earnings 38 cents a share on sales of $447 million.
* Tesla Motors Inc (NASDAQ:TSLA) posted a wider than expected first quarter loss of 76 cents a share on revenue of $30.2 million.
* Activision Blizzard, Inc. (NASDAQ:ATVI) reported first quarter adjusted earnings per share of 6 cents, better than the analyst estimate of 4 cents a share. Total revenue dropped to $1.17 billion from $1.45 billion a year ago, hurt by a fall in subscribers of its “World of Warcraft” game.
* OLED technology vendor Universal Display Corporation (NASDAQ:PANL) posted a first quarter loss of 4 cents a share on revenue of $12.6 million, below the average analyst estimate of a profit of 4 cents a share on revenue of $16 million.
* Home-furnishings chain Bed Bath & Beyond Inc. (NASDAQ:BBBY) agreed to acquire smaller rival Cost Plus, Inc. (NASDAQ:CPWM) for almost $495 million in cash, or $22 per share.
* Video game developer Take-Two Interactive Software, Inc. (NASDAQ:TTWO) announced that it would delay the release of its next “BioShock” shooter game into next year.
* Oil and gas company W&T Offshore, Inc. (NYSE:WTI) reported first quarter profit excluding items of 40 cents a share, trailing the average analyst estimate of 50 cents a share.
* Biotechnology company Amyris Inc (NASDAQ:AMRS) fell to a record low in trading today after reporting a first quarter loss that fell below analysts’ estimates.
* Vacation services provider Interval Leisure Group, Inc. (NASDQA:IILG) reported first quarter sales of $126.7 million, exceeding the average analyst estimate of $122.5 million.
Hedge Fund News Update
* China’s securities regulator is mulling over a proposed plan to allow international hedge funds direct access to the country’s massive and lucrative capital markets.
* According to new data released by BarclayHedge and TrimTabs Investment Research, hedge fund inflows in March 2012 were significantly lower than February. Hedge funds received $2.3 billion in March, compared with net inflows of $6.8 billion in February.
* Vancouver-based telecommunications giant Telus Corporation (TSE:T). has withdrawn its share-consolidation proposal just hours before a shareholders’ vote at the company’s annual general meeting in Edmonton, acknowledging that New York-based Mason Capital Management would have defeated the plan.
* Nelson Peltz’s New York-based hedge fund Trian Fund Management LP has acquired a stake of more than 7 percent in Irish industrial group Ingersoll Rand Plc.
* Daniel Loeb said that Yahoo CEO Scott Thompson should resign immediately and the Internet company’s current CFO or global head of media should take up his place on an interim basis.
* Hedge fund manager Phil Falcone said that he is concerned about slowing growth and rising inflation in China, and things might end up being far worse than what they currently are.
* Ryo Ishiyama, a former Tokyo-based Deutsche Bank derivatives specialist, is planning to launch a global commodities hedge fund in July. The Tokyo-based Steinberg Capital Co. will employ a strategy that uses computer systems to invest in exchange traded futures globally.
* Singapore-based Riley Paterson Investment Management will shut down the Riley Paterson Asian Opportunities Fund after assets plummeted by more than 90 percent over the past two years.
Brokerage Upgrades and Downgrades on Wednesday, May 09, 2012
* ARM Holdings plc (ADR) (NASDAQ:ARMH) was raised to “neutral” from “underperform” at DA Davidson with a target price of $25.
* Coleman Cable, Inc. (NASDAQ:CCIX) was upgraded to “accumulate” from “neutral” at Global Hunter Securities with a target price of $11.
* Callon Petroleum Company (NYSE:CPE) was raised to “outperform” from “neutral” at Robert W. Baird with a target price of $7.
* Fossil, Inc. (NASDAQ:FOSL) was upgraded to “buy” from “hold” at The Benchmark Company with a target price of $100.
* The Hershey Company (NYSE:HSY) was raised to “buy” from “hold” at Argus with a target price of $78.
* Analog Devices, Inc. (NASDAQ:ADI) was cut to “neutral” from “buy” at UBS with a target price of $40.
* CF Industries Holdings, Inc. (NYSE:CF) was downgraded to “sell” from “hold” at Dahlman Rose.
* Dime Community Bancshares, Inc. (NASDAQ:DCOM) was downgraded to “hold” from “buy” at BB&T Capital Mkts.
* Herbalife Ltd. (NYSE:HLF) was downgraded to “average” from “buy” at Caris & Company with a target price of $39.
* RPC, Inc. (NYSE:RES) was downgraded to “hold” from “sell” at Standpoint Research.