As a member of the Motley Fool 10% Promise Team, I see all kinds of wild market swings throughout the week. Here are a few of the moves that caught my eye and made me say, "Hmmm."
Value investors must not appreciate tech
I don't consider myself a strict value investor, but there are some companies I regard as extreme values in the tech industry. Cisco (Nasdaq: CSCO) was once a tech bellwether, but it's now apparently been kicked to the curb -- because it only reported 62.4% adjusted gross margins. What?!?
Most businesses would die for that kind of margin performance, and with $40.2 billion of cash and investments on the balance sheet, a $105 billion market cap seems like a great deal to me. I understand that margin trends are heading in the wrong direction right now, but we aren't talking about a dying business like Blockbuster here. This is Cisco!
There are buyouts everyone can cheer
When an acquisition is announced, usually we see a "winner" and a "loser." The company being acquired sees its stock skyrocket, and the acquirer's stock drops slightly. That's not surprising, since studies have shown that most buyouts actually destroy shareholder value.
But this week, we saw two deals that not only got cheers from both sides, but may have caused a few investors to hyperventilate with excitement. On Tuesday, health-care providers RehabCare Group (NYSE: RHB) and Kindred Healthcare (NYSE: KND) decided to join forces, sending both stocks on an upward spiral. Part of the deal will be paid for with Kindred's stock, so when Kindred's shares rose, RehabCare Group's shares jumped through the roof.
In a far stranger deal, DSW (NYSE: DSW) announced that it would buy Retail Ventures (NYSE: RVI), whose only business was owning shares of DSW. The benefit of the deal, besides eliminating confusion, was $350 million in net operating losses and other tax credits that DSW will now be able to take advantage of. The deal didn't change anything about DSW fundamentally, but it still sent both stocks higher.
Don't kill the golden goose
Activision Blizzard (Nasdaq: ATVI) was absolutely crushed yesterday after the company announced weak earnings and the death of Guitar Hero. Wall Street hates uncertainty, and even though Guitar Hero's best days were behind it, investors were left feeing a bit uneasy. Activision has lots of cash flow, and if you're willing to take a leap of faith on upcoming games, this Motley Fool Stock Advisor pick could be a steal at these levels.
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More 10% Moves This Week:
