As a member of our "10% Promise" team, I see a lot of wild swings in the market. Sometimes there's an easy explanation, and sometimes the market knocks us for a loop without telling us why. But every week I learn something new. Here are a few things the market taught me this week.
Analysts hold way too much power
The stock market seems to go crazy any time an analyst upgrades or downgrades a stock. This week, several analyst revisions were to the upside, boosting Boyd Gaming (NYSE: BYD) as well as Rule Breakers picks Ancestry.com (Nasdaq: ACOM) and Lumber Liquidators (NYSE: LL).
You don't see 10% moves when an analyst upgrades a widely held megacap stock, but these smaller, less-followed companies go crazy on just about any news from an analyst. Is there something wrong with that or is it just me? Is Boyd Gaming really worth $100 million more now that Barclays moved the stock to "overweight"? Do investors need to hear from Canaccord Genuity to want to buy Ancestry.com? Really?
Gold is hanging on, but for how long?
Shares of gold miners took a nosedive Tuesday as gold prices took a big step back. Paramount Gold and Silver (AMEX: PZG) and Hecla Mining (NYSE: HL) both hit our plunged list, taking the entire sector with them.
I'm no expert in gold, but if you follow the market, it's tough to ignore the constant chatter about the shiny metal. What I do know is the last time gold went on a run like this in the late '70s and early '80s, it was followed by a hard crash, coinciding with falling unemployment. Unemployment isn't falling a lot yet (I'm taking today's numbers with a grain of salt), but when it does, will gold hold the massive gains we've seen over the past 10 years? I'm not betting on it.
The year of the buyout begins
U.S. companies are flush with some $2 trillion in cash, according to the Federal Reserve, leaving some to predict this will be a big year for M&A. We got off on the right foot this week when Qualcomm (Nasdaq: QCOM) agreed to buy Atheros Communications (Nasdaq: ATHR) for $3.5 billion.
It's anyone's guess who's next, but this Fool thinks this is just the start of a new buyout binge. Private equity is hungry again, corporate America has cash, and no one is in a rush to start hiring people. The only way to grow is by buying competitors or bolt-on acquisitions.
Interested in reading more about one of the companies above? Add it to My Watchlist, and My Watchlist will find all of our Foolish analysis on this stock.
More of this week's 10% moves:
