Image source: Shake Shack.
One of the most-interesting facets of the current bull market is the extent to which stocks manage to bounce back from short-term challenges in trading. Major market benchmarks fell sharply Thursday morning, and investors seemed concerned by the Federal Reserve's assessment of the U.S. economy as being vulnerable to potential problems like the possible British exit from the European Union.
Yet even though the Dow was down almost 170 points at one point during the trading session, stocks bounced back despite the gloomy mood. By the end of the day, the Dow and S&P 500 were both up between a third and a half percentage point. Many individual stocks did better, and Shake Shack (SHAK +3.40%), Viacom (VIAB +0.00%), and QLogic (QLGC +0.00%) were among the best performers in the market on Thursday.
Shake Shack rose 5% after the new burger chain received positive comments from an analyst firm. Buckingham Research noted that, even though Shake Shack has seen its stock fall substantially from its IPO price, the burger chain has already inspired a loyal following that gives the company almost cult-like status among its customers.
That kind of marketing success based on word of mouth and popular perception is almost impossible to create artificially, and it speaks to the growth potential that Shake Shack has as it aims toward making expansion plans a reality. With fewer than 100 locations, Shake Shack has plenty of room to expand before having to worry about saturation. If its new locations can sustain the momentum of its popularity, then Shake Shack investors could get the last laugh.
Viacom finished up 7% in the wake of a partial resolution of a dispute between Sumner Redstone and company executives. Redstone, who controls a majority of the voting rights for Viacom, elected five new directors to the Viacom board. Among those replaced was Chairman and CEO Philippe Dauman. Redstone looked for a Delaware court ruling to confirm that he had the authority to replace the directors in accordance with the bylaws of the company.
Some will argue that the move can't take effect until a formal special meeting of the shareholders of the company takes place; but any such moves would only delay the inevitable. Investors, meanwhile, appear pleased that the long-standing issue is starting to get resolved, regardless of the actual outcome.
Finally, QLogic gained 9%. The company agreed to a merger bid from Cavium for $1.36 billion, which values QLogic at roughly $15.50 per share. The terms of the bid include $11 per share in cash for QLogic shareholders, along with just less than a tenth of a Cavium share for every QLogic share held. QLogic executive chair Christine King said that, "the scale of operations of a nearly $1 billion revenue business will allow the combined company to deliver better solutions for customers."
Meanwhile, Cavium expects that the deal will be accretive to its adjusted earnings by next year, giving the company a chance to add QLogic into its mix, and scale up in the data center and storage markets. For QLogic shareholders, cashing out of more than 70% of their stake at a premium to where the stock traded previously looks like a reasonably good deal going forward.
