U.S. stocks were displaying small gains on Thursday, with the Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) up 0.23%, and 0.01%, respectively, at 12:25 p.m. EDT. Perhaps they are focused on the developing earnings season, but it appears investors aren't giving geopolitical risk any respect right now.
First, in a muscular show of force, Russia has dramatically escalated its action in Syria, using long-range cruise missiles fired from the Caspian Sea to hit anti-regime forces (the missiles flew nearly 930 miles, traversing Iranian and Iraqi airspace).
Second, according to reports yesterday evening, the U.S. will send a warship inside the 12-nautical mile limit that China claims for a man-made island chain in the South China Sea. China has been increasingly assertive regarding its territorial claims in this area over the past several years. The U.S. has not breached this limit since 2012, which pre-dates the expansion of China's construction program.
I would have thought the combination of the two events would be worth some sort of response in the S&P 500. However, the CBOE Volatility Index (the "VIX"), which is sometimes referred as Wall Street's "fear index," is up 0.76% at 12:25 p.m. EDT.
On Monday, Twitter announced it was appointing Jack Dorsey as its permanent CEO; Mr. Dorsey had been interim CEO since the departure of Dick Costolo in June. The microblogging service got a vote of confidence yesterday as Saudi investor Prince Alwaleed Bin Talal disclosed in an SEC filing that he has raised his ownership stake to 5.17%, second only to Twitter co-founder Evan Williams and Morgan Stanley (one of the underwriters of the company's IPO).
Prince Alwaleed, the self-proclaimed "Warren Buffett of Arabia," is reputed to have a good eye for value (and for his obsession with his ranking on the Forbes list of global billionaires).
While value investors are comfortable taking contrarian positions, Prince Alwaleed's action goes against the collective opinion of a group of "elite" investors. Website Insider Monkey reported yesterday:
The total number of hedge funds long Twitter Inc declined to 47 from 64 in the quarter, while the total value of hedge funds' holdings declined to $701 million or 2.9% of the float, from $1.75 billion held at the end of March.
However, Prince Alwaleed may find some comfort in the actions of another valuation-driven investor. In mid-August, valuation guru Aswath Damodaran of New York University pegged Twitter's value at $26 per share, but noted that his range of values is skewed to the upside, prompting him to pay $27 on his share purchase.