The 5-Sigma Report

The market has handed investors some nice, consistent returns over the long run, but in the short term, it can often be as unpredictable as an episode of The Real World. In a pair of articles, I explored the market's so-called "fat tail" distribution -- the tendency of stocks to make huge moves that seem extremely statistically improbable. Since then, I've been following "5-sigma moves," or one-day price moves that are five standard deviations or more from a stock's average one-day change.

Keep in mind that we're looking at the price change relative to the stock's historical volatility, and not just the same old jittery "most active" stocks. So even though stocks like Technical Olympic, Rackable Systems, and Monster Worldwide saw some big movement last week, you're not going to see them on this list, because of their higher average volatility.

Here's a taste of a few of the 5-sigmas from the past week:

Simply moving up
There's nothing terribly complex about why Lundin Mining has been doing so well. The company operates mines in Sweden, Ireland, and Portugal that produce zinc, lead, silver, and copper. With prices for base metals absolutely booming over the past five years, you pretty much have to work hard to do poorly right now.

After snapping up EuroZinc last year, the company took another step to expand its capabilities last week when it announced the acquisition of Rio Narcea. The $858 million transaction will, among other things, add nickel to the assortment of metals that the company mines. Nickel is up with the rest of the metals over the past five years, and it has been a rocket over the past 12 months, while some of the other metals have taken a bit of a breather.

Investors appear to highly approve of the acquisition, driving up shares 15% the day the deal was announced -- not the typical reaction to an acquisition. The stock has also seemed to have a strong cheering section at TheStreet.com, where Jim Cramer has taken time out on a number of recent occasions, including after the acquisition announcement, to recommend Lundin. And as we know, for short-term gains, it never hurts to have Cramer on your side.

Preliminary = disappointing
At least, that was the equation last week for Packeteer. Last Wednesday, the company, which provides software for wide-area networks, announced preliminary results that were "very disappointing." Management has scheduled its official results announcement for April 19, but the fact that it now expects $31 million to $33 million in revenue for the first quarter, a 25% drop from the fourth quarter, appears to have convinced it to let investors know early.

In the same press release, Packeteer announced that its vice president of worldwide sales, Arturo Cazares, has resigned. Since Cazares joined the company back in the beginning of 2004, top-line growth has been strong, and the company has maintained its gross margins. What happened here will likely remain conjecture, but it would seem odd to me for the company to push Cazares out over one poor quarter. It's more likely that Cazares started looking for greener pastures, and Packeteer ended up suffering as a result.

While that's just some guesswork on my part, if wandering focus at the top of the sales department did have something to do with the poor results for the quarter, it's very likely that the ship can be quickly righted. While I doubt my theory will be confirmed or denied in the company's conference call, investors will surely get some more detail on the shortfall on the 19th.

Check out what other Fools think of Lundin and Packeteer at The Motley Fool's CAPS investing community.

Fool contributor Matt Koppenheffer enjoys his weekly statistical rendezvous even more than he likes watching the crazies duke it out on The Real World. He does not own shares of any of the companies mentioned. The Fool's disclosure policy has passed the mandatory drug screening and is cleared to help you continue hitting home runs.