The Dow Jones Industrial Average rallied sharply higher yesterday, closing above 13,000 again as earnings looked better for a number of businesses. But with the companies below going down hard, first let's see whether they had good reason to drop. Sometimes, panic-fueled declines can make excellent buying opportunities.
The markets soared 194 points, or 1.5%, so stocks that went down by larger percentages are pretty big deals. These two stocks fell hard; let's see if there's anything to redeem them.
CAPS Rating (out of 5)
|Telecom Argentina (NYSE: TEO )
|magicJack VocalTec (Nasdaq: CALL )
Source: Motley Fool CAPS.
What's yours isn't mine (anymore)
"No man's life, liberty, or property is safe while the legislature is in session," an aphorism usually attributed to Mark Twain talking about Congress, could also be applied to certain South American countries.
No longer is it just Venezuelan strongman Hugo Chavez riding roughshod over the rights of business owners. Now Argentine leader Cristina Kirchner has seized the assets of Spanish oil giant YPF (NYSE: YPF ) . If she's willing to make an international incident out expropriating the property of a foreign company, then no private property is safe in the country, and it helps explain why Telecom Argentina is falling in the wake of the news.
The telecom giant has been feeling the jackboot on its neck and was pressured by the government into suspending its dividend, a move that will affect Telecom Italia, which owns nearly a quarter of Argentinean counterpart. There are plenty of people who can see the writing on the wall of what's to come, and Spain's Telefonica (NYSE: TEF ) , with a significant presence in the country, could be the next domino to fall.
Such are the hazards in doing business with tyrants. ExxonMobil and ConocoPhillips found that out when Chavez nationalized almost every industry in the country in an effort to consolidate power. Kirchner appears to be following in his footsteps, and any company doing business in Argentina today is at risk.
I'm rating Telecom Argentina to underperform on CAPS just as I did YPF last month, when Kirchner started agitating to occupy its offices. Telecom Argentina still has the confidence of most CAPS members at the moment, but add the stock to your Watchlist to be notified when the strongwoman comes knocking on the door demanding the keys to the place.
Hear ye! Hear ye!
Maybe business really is that good, but magicJack VocalTel seems to go on a bit much about it. Perhaps investors are getting fatigued by all the hype.
Last week, the VoIP provider reported preliminary first0quarter results that touted all-time record revenues and said it will trounce analyst earnings expectations, and shares jumped nearly 11%. A week later, it announced that it expects to grow revenues at 20% to 30% annually through next year, with earnings forecasted to be as much as $2.50 per share at the end of 2013 -- 50% higher than what Wall Street is estimating.
On cue, the stock jumped again, this time by just 5%, but the next day it fell by 8%. On the heels of its chairman's resignation from the board, maybe the VoIP felt the need to get some excitement back in its stock. After hitting $28 a share, shares have given back about 17%, though that's decidedly better than its other consumer-oriented rival, Vonage, which is down more than 60%.
Some have made much out of the fact that one of magicJack's directors has sold $1.4 million worth of stock the other day, but he's been selling since at least the beginning of the year through a planned strategy. Although the most recent sales are outside that program, it was partially made up for by a half-million-dollar purchase by the director who will probably takeover as chairman. As Peter Lynch noted, insiders can sell for any reason, but they typically buy only for one: They think the stock is going up.
That doesn't mean I'm going to change my underperform rating on CAPS, as I get the same feeling held by gameguru that magicJack is just a tad too self-promotional. Besides, I believe that 8x8 (Nasdaq: EGHT ) , a VoIP shop that focuses on enterprise-level customers, has a better opportunity ahead of either magicJack or Vonage.
But tell me in the comments section below or on the magicJack VocalTel CAPS page whether you think there's a reason not to hang up on this sale pitch, and then add the stock to your Watchlist to be alerted to the next hyperbolic press release to be issued.
Ready for a resurrection
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