Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
Making investment decisions based on short-term movements in the stock market is not the tried and true way to financial security. Focusing on the long-term trends -- and knowing what variables truly matter over the long run -- is a much more surefire, if boring, approach.
"So why even write an article about big movers for the week ahead?" you may ask. The answer is that we're all human, and no matter how much we may believe to the contrary, we're liable to make emotional decisions when we see our stocks making huge moves.
This article is meant to prepare investors in three companies for big moves in the week ahead. The reason these three companies are likely to be volatile is that they're all highly shorted, and they're reporting earnings this week.
Last week, there was only one such stock identified. But sure enough, it popped as much as 10% following earnings. Here are this week's three stocks to watch:
|
Company |
% Shares Short |
When |
Expected Revenue (in Millions) |
Expected EPS |
|---|---|---|---|---|
|
InvenSense (INVN +0.00%) |
33% |
Tuesday |
$66.8 |
$0.12 |
|
Advanced Micro Devices (AMD +3.25%) |
18% |
Wednesday |
$1,500 |
$0.06 |
|
Fusion-io (FIO +0.00%) |
18% |
Thursday |
$89.4 |
($0.10) |
Sources: finviz.com, E*Trade.
InvenSense
This company makes micro-electro-mechanical system gyroscopes. While a lot of techies out there might know what that means, the layman's version is this: The company makes the technology that allows devices to know when and how they are being moved. The easiest and earliest reference point would be Nintendo's first-generation controller.
Source: Wikimedia Commons.
Shares have more than doubled since last April, which has some investors betting that a drop is in the near future. But more importantly, the company has been engaged in a lengthy court battle with STMicroelectronics for a while now. Beyond needing to continue out-innovating STM, if InvenSense were to lose the case, it could have negative consequences for investors.
Advanced Micro Devices
AMD is a worldwide semiconductor company that focuses on servers, PCs, and mobile devices -- though it was very late to the scene for mobile. Shares of the company are up about 80% since bottoming out last April, but they still sit almost 46% lower than they were in early 2012.
The key to AMD's future is twofold. The company's chips were selected to be in Sony's PS4 and Microsoft's Xbox One. Strong sales here would definitely be a boost to the company. But the second half of the equation is that the PC market needs to improve moving forward, as the prevalence of mobile devices has continually eaten away at the once-ubiquitous PC.
Fusion-io
This company with a funny name is in the business of both hardware and software to enable data storage. Over the past year and a half, shares have fallen more than 70%. The problem hasn't necessarily been the quality of Fusion-io's products, but its inability to compete with others on price.
Specifically, EMC has roughly $10 billion in cash on its balance sheet; Fusion-io has only about 2% of that amount, with $225 million. That's important, because EMC can offer its memory products for a steep discount and still survive, but if Fusion-io wants to match those prices, it will be losing money it can't afford to lose.
