Archive for the ‘Large Cap Stocks’ Category
The stock market news wire is humming this morning on an announcement that Citigroup (NYSE: C) has barred investors in its CSO Partners hedge fund from withdrawing their investments. According to the Wall Street Journal, investors in the fund attempted to withdraw almost 1/3 of fund assets due to fear concerning mortgage backed securities. However, the fund has refused, explaining that they would have to sell valuable securities at huge discounts (which would hurt all investors).
So, is that Really so Bad?
True, the fund did make disproportionately large investments in leveraged securities (even breaking trading policies set within the firm). However, the fund was down only about 11% in 2007, and the previous manager has since been replaced. If you are a diversified institution this fund should only be a small percentage of your portfolio. Therefore, a loss of 11% is not so bad given the amount of risk involved (whether or not all information is truly available about the underlying securities).
Further, according to various sources, CSO is a corporate debt fund, not a fund focused on mortgage backed securities. By keeping investors from redeeming assets, Citigroup is essentially preventing them from making a knee jerk reaction that will guarantee all investors lose money.
Where There’s Smoke, is There Fire?
However, uncertainty drives the market and institutional fund managers are under pressure to “not do worse” than market benchmarks. This will lead many to head for the door as soon as they can. Their argument will undoubtedly be the proverbial: “where there’s smoke there’s fire”. Given the current market situation, I guess I can’t say I blame them.
Tags: citigroup, stock market news
According to the Wall Street Journal, large cap bellwether Microsoft Corp. (NASDAQ: MSFT) has offered to buy search engine Yahoo Inc. (NASDAQ: YHOO) for around $45 billion. The proposed deal, a 60% premium to yesterday’s closing price, works out to around $31 / share.
Competing with Google
Undoubtedly, the move is a play to gain traction in the search engine space and compete, according to Microsoft, in a market “increasingly dominated by one player”. Come to think of it, I wonder if there are any opportunities for competition in the PC operating system or web browser space? Those seem to be markets dominated by one player as well…hmm. Seriously though, the deal probably makes sense and could ultimately give Google a run for its money if it goes through.
Ouch! French bank Societe Generale announced today it was the victim of fraudulent trading by a lone trader at its futures desk. The fraud is somewhere in the neighborhood of $7 billion, putting it well ahead of the Barings bank implosion of the 90s (subject of the film “Rogue Trader”). The news does not bode well for the bank, who’s stock has already taken a beating as a result of the subprime lending crisis.
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According to Reuters, Southwest Airlines (NYSE: LUV) announced today it nearly doubled its profit from $57 million in Q4 ‘06 to $111 million in Q4 ‘07, exceeding analyst expectations. A good portion of the budget carrier’s increase came via a 154% gain in its fuel hedging positions (up from $118 million to about $300 million). The announcement, while positive, did little to allay the market’s concerns about rising fuel costs and their impact on airline stocks moving forward.
A Glimmer of Hope
Still, Southwest offers a small glimmer of hope in a tough industry, and continues to maintain a focus on customer service through conduits such as its Rapid Rewards program and Business Select offering. Further, it continues to innovate. Per CEO Gary Kelly, Southwest will start testing inflight internet connectivity on several of its aircraft this year.
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No doubt about it - when investors think technology, high growth, and innovation - one of the first companies that comes to mind is Apple Inc. (NASDAQ: AAPL). However, despite quarterly earnings that beat analyst estimates, shares of the tech giant shed about 12% in after hours trading yesterday. Per Reuters, the selloff came in response to lowered Q2 earnings guidance by the company of $6.8 billion vs. Wall Street’s expectations of $7 billion.
Recession Fears
Was the selloff justified? Maybe, maybe not. However, with fears that a recession is rapidly descending on the US economy, it does appear that investors are betting on a decrease in personal consumption and exiting this stock. Even so, this is still a stellar company and I believe it will continue to take market share in the personal computer space moving forward.
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