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Why Fifth Street Finance, Nutanix, and Dominion Diamond Jumped Today

By Dan Caplinger - Jul 14, 2017 at 4:28PM

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The market hit new records, and these stocks led the way. Find out why.

The stock market was strong on Friday, and the Dow Jones Industrials and S&P 500 both closed at record high levels. Major benchmarks finished higher by roughly 0.5% to 0.75% as investors felt more upbeat about the economy as a whole. Even though bank stocks fell after major financial institutions reported second-quarter results that didn't quite live up to investors' hopes, gains in technology, healthcare, and energy reflected greater enthusiasm about their future prospects. In addition, company-specific news helped lift stocks throughout the market, and Fifth Street Finance (NASDAQ: FSC), Nutanix (NTNX 0.46%), and Dominion Diamond (NYSE: DDC) were among the best performers on the day. Below, we'll look more closely at these stocks to tell you why they did so well.

Fifth Street gets taken over

Shares of Fifth Street Finance climbed over 16% after the business development company had its management replaced by a new investment advisor. Oaktree Capital Group (OAK) will assume management responsibilities over Fifth Street Finance and another related business development company, paying $320 million in cash to current manager Fifth Street Management LLC. Once the deal is complete, Fifth Street Finance shareholders will enjoy reductions in the management fees they pay, including drops in the annual management fee from 1.75% to 1.5% and in the incentive fee from 20% to 17.5%. The deal still needs approval, but the companies hope that they can consummate the agreement by the fourth quarter. Investors are excited by Oaktree's reputation as a highly respected manager, believing Oaktree could help Fifth Street shares trade at a much narrower discount than they have under current management.

Nutanix logo.

Image source: Nutanix.

Nutanix climbs on Goldman analyst move

Nutanix stock jumped 9% in the wake of extremely positive comments from analysts at Goldman Sachs. The Wall Street behemoth put the technology infrastructure company on its conviction buy list, setting a price target of $31 per share on Nutanix stock. Among the bullish comments were that a large number of prospective clients are expected to seek out the specialized services that Nutanix provides, that growth and high margins should help its bottom line, and that waves of consolidation in the technology industry could make Nutanix a takeover candidate. The analyst report called the stock a "once-in-a-decade" opportunity in technology infrastructure, and that inspired shareholders to feel even better about Nutanix.

Dominion Diamond shines on takeover speculation

Finally, shares of Dominion Diamond gained about 6%. Reports surfaced today suggesting that privately held Washington Companies could be looking at a higher potential acquisition bid for the Canadian company, which is one of the largest producers of diamonds in the world. Washington Companies had initially offered $13.50 per share in cash for Dominion back in March, but the diamond company turned down that offer and chose to pursue a potential sale more broadly. Dominion came out with a statement late in the day saying that it hasn't made any final decisions with respect to strategic alternatives, but the gain in the stock price took it right under the $13.50 mark, suggesting hopes that an even higher bid might be in the offing.

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Stocks Mentioned

Oaktree Capital Group, LLC Stock Quote
Oaktree Capital Group, LLC
OAK
Nutanix Stock Quote
Nutanix
NTNX
$22.07 (0.46%) $0.10

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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