Sometimes Merger Mondays and positive economic data simply aren't good enough to propel the broad-based S&P 500 higher. Today was one such day, which saw the index dip ever so slightly as investors took some profits off the table. Of course, who can blame them after six previous days of gains?
Existing-home sales for May took center stage today, rising nearly 5% to a seasonally adjusted 4.89 million. By comparison, economists were looking for only 4.74 million total units. Rising home inventory levels are good news for consumers, as they'll stymie runaway home-price increases and offer a better selection of homes to choose from. In addition, we're seeing a healthy rebound from the first quarter, where the polar vortex put a stranglehold on most sectors, especially housing. Now we simply need to see follow-through purchasing from consumers, with lending rates threatening to touch a one-year low.
By a lesser token, but a nonetheless bullish one, the Markit Flash U.S. Manufacturing Purchasing Managers' Index rose to a reading of 57.5 in June from 56.4 in May. According to my Foolish colleague Justin Loiseau, who keeps a tight tab on leading U.S. economic indicators, this marked a four-year high for the manufacturing index and would imply that industrywide expansion is likely to continue.
By day's end, the S&P 500 had dipped by a fractional 0.26 points (-0.01%) to close at 1,962.61. However, just because the S&P 500's move was minimal doesn't mean that we didn't have a number of individual stocks screaming to the upside.
Topping the charts today is electric utility and energy holding company Integrys Energy Group (UNKNOWN:TEG.DL), which tacked on 12.1% after Wisconsin Energy Group (NYSE:WEC) agreed to buy the company for $5.7 billion, excluding debt. Under the terms of the deal, Integrys shareholders will receive $18.58 per share in cash and 1.128 Wisconsin Energy shares, representing about a 17% premium to Friday's close.
The combined entity will serve more than 4.3 million people in Wisconsin, Illinois, Michigan, and Minnesota, and, most importantly, 99% of all revenue will come from regulated industries, meaning no surprises for shareholders and fairly predictable long-term growth potential. With the deal expected to be accretive to EPS in 2015 and the combined entity projected to grow at 5%-7% annually, I see no reason why investors in both parties shouldn't be excited.
Copper, gold, and molybdenum miner -- and also one of my largest personal portfolio holdings -- Thompson Creek Metals (NASDAQOTH:TCPTF) advanced 9.7% on the day after announcing the conversion price for its tMEDS, or tangible equity units. Owners of tMEDS had the option of either exchanging their tMEDS for common shares based on the average price of Thompson Creek's common shares over the prior week of trading, with each tMEDS equating to 5.8457 shares of Thompson Creek common stock, or hanging on to their tMEDS for the entire term.
Now in English, this simply means that Thompson Creek is looking for ways to reduce its debt load, and it offered tMEDS note holders the opportunity to convert their tMEDS into common shares. It would appear that traders had been trying to keep Thompson Creek's price low to minimize tMEDS conversion, since conversion would equal dilution. With an average price over the past week of $2.73, it's unlikely there will be many takers, which means little in the way of dilution for existing share and call holders like myself. With the company's Mt. Milligan copper and gold mine remaining on track and molybdenum prices up 50% over the past couple of months, I'm more positive than ever on Thompson Creek's future, but keep my ownership bias in mind as you read that last statement.
Finally, integrated circuit developer PLX Technology (UNKNOWN:PLXT.DL) bid adieu to public listing by agreeing to be purchased by Avago Technologies (NASDAQ:AVGO) for $309 million, or $6.50 per share in cash. According to Hock Tan, the CEO of Avago, "The core PLX PCIe silicon business fits very well with the Avago business model and broadens Avago's portfolio serving the enterprise storage and networking end markets."
Based on the press release that sent PLX higher by 9.1% on the day, Avago anticipates that the deal will be earning accretive immediately, which is good news for both parties involved. But I do have to cringe at the terminology Avago used in its press release with regard to "driving the PLX business model to a level consistent with Avago's long term business model," as it implies that Avago is dealing with an inferior or inefficient product develop. Overall, though, and to make it a perfect three-for-three today, I believe investors are getting a fair deal on both ends.
Sean Williams owns shares of Thompson Creek Metals as well as Jan. 17 2015 $2 calls, but has no material interest in any other companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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