You saw the headlines. You know your stock price made a big move. But what does that portend for your investment's future?
By pairing the latest news with the collective wisdom of our 180,000-strong Motley Fool CAPS investing community, we might be able to discover whether your stock's latest exploits are a short-term hiccup -- or the start of a much bigger trend.
The following stocks have all made big moves over the past five trading days:
Change Past Week^
|RealNetworks (Nasdaq: RNWK )||*||(27.9%)|
|PulteGroup (NYSE: PHM )||*||37.1%|
|Radian Group (NYSE: RDN )||**||73.5%|
Source: Motley Fool CAPS.
^From Aug. 23 – Aug. 30.
A high-speed crash and burn
Maybe RealNetworks created the media-streaming phenomenon 15 years or so ago with its RealPlayer media player, but just because business is bad these days doesn't mean it should try to strong-arm individuals in specious lawsuits for linking to rival services.
RealNetworks' business has been terrible since more viable and user-friendly players hit the scene. Trailing revenues at RealNetworks are down 41% from their peak in 2008. To make up for it, the owner of the also-ran Rhapsody digital music service is going after a webmaster who had the temerity to link to a page that listed competing media players including one called Real Alternative. The man's computers were confiscated and RealNetworks is trying to get more than $300,000 in "damages" because, it says, the rival's software violates its trademarks and copyright. Mind you, the webmaster didn't host the software; he merely linked to a page that listed Real Alternative.
But, you might ask, doesn't CNET Networks link to Real Alternative? Doesn't Google (Nasdaq: GOOG ) ? Why, yes, they do, but RealNetworks realizes that CNET has deep-pocketed CBS behind it, and few have deeper pockets these days than Google. A simple webmaster should be easier to roll than a big corporation. Heck, RealNetworks hasn't even gone after Real Alternative!
Almost 20% of the CAPS members rating RealNetworks think its chances of beating the market are about as good as its media player making a comeback. Join me over on the RealNetworks CAPS page in marking the software company to underperform the markets for engaging in a ludicrous case of cyber bullying.
Taking heart in the future
Both Radian Group and MGIC Investment (NYSE: MTG ) rocketed higher as rival PMI Group found itself locked out of writing new business. It announced that its PMI Mortgage Assurance subsidiary is no longer eligible to write new business in any state, and as it was writing insurance for them, PMI has no way of doing business now. So whatever business might be out there will likely fall to Radian and MGIC.
MGIC's recent earnings report was beset by troubled loans as defaults jumped and loan loss reserves surged 44% from last year. Radian itself said while it experienced "momentum" in loss mitigation, loan modifications accounted for 21% of second-quarter "cures," up from 17% in the first quarter. A cure is when a loan returns to on-time payment status. In July, Radian saw almost 8,100 new delinquencies, with 5,800 cures (and 2,400 loans paid up), so that its total delinquent inventory fell slightly for the month, but no word on how many of the cures were due to modifications.
Somewhat more than half of the CAPS All-Stars rating Radian think it can outperform the broad market averages, hardly a resounding endorsement, particularly when the low, one-star rating assigned to the company suggests there are better places for your money.
Add Radian to the Fool's free portfolio tracker and see if it can shake the blues and rise to the top.
A weak foundation
If things are looking up for mortgage insurers, then it's got to be a good time to buy homebuilders, too, right? There seems to be a consensus building that now's a good time to get into PulteGroup, Toll Brothers (NYSE: TOL ) , and KB Home (NYSE: KBH ) . Heck, even home prices turned up, rising 3.6% in the second quarter.
But look again at the rising level of delinquencies and foreclosures, the persistently high unemployment rate, and an economy that can't get its footing, and you'll see that the analysts thinking Pulte has more upside are simply whistling past the graveyard. And if President Obama's purported mortgage refinance program goes through, it will merely extend the length of time before the housing market finally corrects. Four percent rates might be historically low, but so are the 5% and 6% rates that underwater homeowners are currently "saddled" with.
CAPS All-Star Chemdawg agrees there's still a very long road before there's any light at the end of the tunnel:
not the strongest in a group of businesses all facing significant headwinds....just keeps losing money....recovery is still 18 months out and Pulte may not be here to see it...