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Disney Defied the Dow's Drop Today

By John Divine - Mar 5, 2014 at 6:21PM

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DryShips surges as shipping rates jump; Renren rallies regardless of reason

The Dow Jones Industrial Average ( ^DJI ) has rallied 150% from its lows of 2009, and most Americans are facing a far brighter financial future than they did just five years ago. But the recovery has been slow to translate to the jobs market, and new employment data didn't do much to dispel that fact on Wednesday. According to the ADP, private payrolls increased by 139,000 in February, below the consensus 150,000 estimate. With consumer spending so important to the growth of the economy, investors should pray that Friday's nonfarm payrolls report from the Labor Department provides a rosier outlook. The Dow lost 35 points, or 0.2%, to end at 16,360. 

Although Walt Disney ( DIS -1.90% ) stock, which added 1.2% today, has been doing just fine without mind-numbing jobs growth, you can bet your bottom dollar the company doesn't want the 6.6% unemployment rate to linger any more than you or I do. Although movies can still be successful in a bad economy -- is there a better time to "escape reality"? -- theme parks don't tend to do so well when consumers are cash-strapped. Disney's net income grew at about 20% a year from 2010 to 2012, as the economy slowly recovered, and now Disney's focusing on the future by embracing cord-cutting content distribution in the age of streaming. 

Shares of DryShips ( DRYS ), a $1.7 billion Greek shipping and drilling company, jumped 6.7% today as a common gauge of daily shipping rates rose 3.8%. The Baltic Dry Index, or BDI, measures the daily spot prices for shipping, which tend to fluctuate wildly with the supply and demand for the materials being shipped. DryShips, in a bold strategic move, has voluntarily exposed itself to this volatility by offering primarily day-to-day rates for its shipping services. Where many shippers prefer to secure a more predictable stream of revenue by locking in long-term agreements, DryShips is walking the plank, gambling rates will keep rising and it will reap the rewards. 

Sometimes called "the Facebook of China," but never accurately, shares of Renren ( RENN -0.46% ) roared 22% higher today. Facebook, which made about $1.5 billion last year and just acquired messaging service WhatsApp for $19 billion, is hardly comparable to the $1.76 billion Renren in reality, but sometimes reality doesn't matter to Wall Street psychology. In reality, Renren is unprofitable and just sold the remainder of its stake in group-buying site Nuomi to the Chinese Google, Baidu, for an undisclosed sum. Nuomi's growth had been a shining star in an otherwise uninspiring Renren, but then again I may be proven wrong when the company reports fourth-quarter earnings on March 18. Today's rally wasn't driven by any fundamental improvements in the business, and may have simply been the result of following the momentum after yesterday's 9.5% jump.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
The Walt Disney Company Stock Quote
The Walt Disney Company
DIS
$142.15 (-1.90%) $-2.75
Renren Inc. Stock Quote
Renren Inc.
RENN
$25.88 (-0.46%) $0.12
DryShips Inc. Stock Quote
DryShips Inc.
DRYS

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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