Why These 3 Dow Stocks Surged Today

By Ilan Moscovitz | More Articles
February 1, 2012 | Comments (1)

The Dow (INDEX: ^DJI ) rose an impressive 0.66% today. But some companies surged more than others. These were the top three performers in today's Dow:

Company	Change
Bank of America (NYSE: BAC )	3.2%
Hewlett Packard (NYSE: HPQ )	2.8%
United Technologies (NYSE: UTX )	2.4%

Why, you may ask, did these three stocks take off?

Shares of Bank of America continue to climb as it's looking increasingly likely we may actually see a settlement over the alleged foreclosure fraud that's been plaguing banks and mortgage servicers. There's overwhelming evidence to suggest that banks have been falsifying court documents in order to foreclose on homeowners for years. Since the settlement cost is relatively small and is being negotiated before the allegations have even been investigated, the deal can be presumed to be extremely favorable to the banks. We're now beginning to find out that the proposed settlement may not only cover past, but, oddly enough, future fraud as well. Amazing.

This week, Hewlett Packard shareholders received their own bit of good legal news when a court dismissed Oracle's (Nasdaq: ORCL ) lawsuit against the tech giant. Oracle had accused HP of concealing the fact that it was going to hire Leo Apotheker and Ray Lane, both of whom hate Oracle, at the time that HP's CEO Mark Hurd was getting traded to Oracle. The judge ruled that the charges were pretty irrelevant.

United Technologies is just one of a number of cyclical stocks -- particularly capital goods and consumer cyclicals -- that outperformed the market today. Cyclicals have been making a big comeback so far in 2012, as investors become increasingly optimistic about improving manufacturing, employment, and sales data.

Bank of America, Hewlett Packard, United Technologies all beat the market today. But if you're interested in one stock that our chief investment officer picked to crush the market in 2012, check out our brand-new report, "The Motley Fool's Top Stock for 2012." It highlights a company that is revolutionizing commerce in Latin America. For a limited time, you can get instant access to the name of this company for free.

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Ilan Moscovitz doesn't own shares of any company mentioned. The Motley Fool owns shares of Oracle and Bank of America. 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.

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Report this Comment On February 01, 2012, at 8:45 PM, TheDumbMoney wrote:

Ilan/Diogenes,
As I think I have stated in the past, virtually every known case of "foreclosure fraud" pertains to banks (or servicers representing their interests as agents) that were absolutely duly entitled to foreclose on 100% admittedly defaulting borrowers, but who employed "robo signers" to authenticate vast quantities of their documents, even though the signers in fact had no personal knowledge. The issue was not that the banks/servicers did not actually have the documents or authority to foreclose, but that (likely due to the shear volume) they employed a incorrect methods to authenticate their interests.
Moreover, to the extent there was any such fraud, legally a claim for fraud requires an allegation of how the defrauded was damaged. In these cases, even where the banks acted improperly, the only damage was that an admittedly defaulted borrower (who, on average in judicial foreclosure states now live in their homes for almost two years, for free, after defaulting, while you and I pay rent or a mortgage payment), got to live there for free for a lesser amount of time than he or she or they otherwise would have. This was primarily a fraud on the Courts, not on the borrowers.
The AG talks are mainly about a bunch of AGs who think this is a terrific way to become governor one day. Prime among them is California's AG, Kamala Harris, who likely will be our next governor, in no small part because of her populist grandstanding on these poorly understood issues, even though she knows full well these banks all had the right to foreclose as a substantive matter.
This is not to say what the banks did was correct, especially from a moral perspective. From an investment perspective, however, it is best to keep politics and emotion out of it, and to recognize that as a legal matter, it's substantively small beans.
It just is.
Congratulations on your BAC short last year, though. It was well-timed to match prevailing sentiment, even as BAC's book value rose.
All best,
DTAF

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