Flying in the face of lower March retail sales and plunging consumer confidence, Home Depot's (HD 1.01%) stock advanced 2.5% yesterday and singlehandedly kept the Dow Jones Industrial Average from falling. In the end, the index closed the day at 14,865, virtually unchanged from the day before.
Yet it wasn't anything the big box, do-it-yourself shop did on its own that really sparked the rally. Instead it was an analyst upgrade from Jeffries along with an IPO filing by its former wholesale supply business, HD Supply. The latter is probably the larger reason behind the jump in stock, as the proposed $1 billion IPO would place a few coins in Home Depot's pocket, since it retained a 12% ownership stake in the business after private equity bought it for $8.5 billion in 2007.
The supply business is a vestige of the horrendous period of empire-building engendered by former CEO Bob Nardelli, a ruinous time where the board of directors, stuffed with his cronies from General Electric, stood by and watched him crush shareholder value. There's since been a welcome change in leadership, and Home Depot has gone on to become a responsible corporate citizen once more, with shares up 20% in 2013 alone and more than 50% higher than where they stood a year ago.
The HD Supply offering could put even more money in Home Depot's bank account since the supply house hasn't determined the number of shares it will actually offer, meaning the IPO could ultimately be much larger than $1 billion, increasing its value to the Big Orange Box.
As Home Depot rose in value over the past year, Active Network (ACTV), an online event-management service, has been going in the opposite direction, suffering a yearlong decline that's resulted in the loss of 70% of the company's value. Yesterday, though, it went in the other direction, jumping more than 10% after announcing that it will soon be reporting its earnings.
Hardly seems a reason for such a response, considering expectations are that growth will slow this year even if losses will narrow. Yet it also announced an expansion of its partnership with Ironman, an international participation-sports challenge organization that grew from a single race to some 190 events. Active will provide Ironman with a seamless global platform for activity participation and registration.
Perhaps the combination of the two announcements gives investors hope that it will finally be able to reverse its yearlong slide.
Dance card filling up
Can a deal finally be at hand that allows InterOil (NYSE: IOC) to deliver on the expectations it's promised investors for so long? We've been waiting more than a month for the Papua New Guinea oil-exploration specialist to decide whom it will partner with. The government of the tiny oil outpost demanded that it be a "supermajor" oil company (at the same time it was extracting better terms for itself) as a way of guaranteeing that the oil will actually get drilled, marketed, and sold. Investors have been on tenterhooks since, as InterOil apparently very laboriously goes through the bids it's received.
While management has been cagey about who has actually bid -- there's seems to be an excess amount of parsing necessary when wading through management pronouncements -- at least one observer believes Royal Dutch Shell (RDS.A) is the winner, and that was enough to send the stock hopping 8% higher yesterday.
The folks at UpstreamOnline speculate that Shell has been chosen as the partner and the two are completing details. It wouldn't be out of the realm of possibility, since Shell has previously talked about buying into InterOil, though nothing ever came of it. Shell's domestic upstream business has been struggling of late, and soft oil prices are contributing to its woes that have seen its shares pull back 10% from recent highs. The InterOil PNG prospects look sure enough that partnering with the upstart might give it the sort of momentum that analysts allege has stalled.
Of course, when it comes to InterOil, investors have been disappointed enough times to know better than to count their chickens early, and speculation by one website, while encouraging, is hardly conclusive. I think investors would be better served simply by waiting and watching.