BetterTrades
(Best) STS, RGR, COF (Worst) NNI, PSYS, HPY from Better Trades
February 27, 2009
For the final trading sessions in February, the markets all slipped more than 4% during the trading week as dire economic news pushed the major indices lower. Despite the overall downward spiral within the markets, there were a handful of companies that managed to improve their stock’s price during that time. In addition, other stocks were devastated over the past week, as the market’s selling pressures were too much for the stocks to overcome.
Top 3 Stocks
STI – SunTrust Banks Inc. ($7.28 to $12.03) 65%
One of the budding stocks that posted solid gains over the past five trading sessions was SunTrust Banks Inc. (STI), which saw their stock’s price jump 65% over that time. As a commercial banking entity, SunTrust provides a wide range of financial services in order to meet the needs of its growing customer base in Alabama, Florida, Georgia, Maryland, Tennessee, Virginia, and the District of Columbia. The bank’s primary businesses include traditional deposit and credit services as well as trust and investment services.
Over the past week, the Regional Banking sector, in which SunTrust is a part of, has seen its industry increase nearly 10%, with the Financial sector gaining nearly 1% during that time as well. The bad news is that shares of STI had fallen nearly 81% from a price of $62.23 at this time last year.
Having come close to its 52-week low of $6.00 per share on February 19, with a closing price of $6.70, shares then put a run together even in the midst of investor fears that the nation could nationalize banks, which could then wipe out all value for shareholders.
In a more recent development, the bank announced over the weekend that they were throwing around the idea of the possibility of giving customers the option of banking on their cellphones. The application will allow users to check their balances, pay bills along with other features that will most likely be used with wireless carries AT&T and Verizon.
In Monday’s session, shares of SunTrust broke its upward trend, trading down $0.96, or 8%, to trade at $11.07 per share.
RGR – Sturm, Ruger & Co. Inc. ($6.48 to $9.42) 45%
Another company surging for the week was Sturm, Ruger & Co. Inc. (RGR), which operates in the design, manufacture, and sale of firearms and precision metal investment castings. The company is the only U.S. firearms manufacturer that offers products consisting of single-shot, auto-loading, bolt-action, lever-action, and muzzle-loading rifles in a range of hunting calibers. The company also offers shotguns, .22 caliber rim-fire auto-loading pistols and center-fire auto-loading pistols in various calibers and muzzle-loading revolvers.
Over the past week, shares of RGR were up an impressive 45%, while the overall markets were down 4%. The company issued their quarterly results during the week, which showed that the company’s profits for the year came in at $8.66M, or $0.43 per share, albeit down from the previous year’s tally of $10.32M, or $0.46 per share. However, overall sales jumped from $156.48M to $181.48M for the year, an increase of nearly 16%.
Since the inauguration of President Obama, sales have increased for U.S. handgun manufacturers, with RGR’s sales increasing 81% in their 4th quarter. With that, an analyst from CL King & Assoc. upgraded their stock from “accumulate” to a “strong buy” just last week.
Additionally, a Deutsche Bank-North America analyst, responding to an FBI report earlier this month that January background checks on potential firearms purchasers increased 29% from the same month of 2007, admitted that the potential of upcoming federal restrictions is boosting sales within the firearm industry.
As the week began on a down day, shares of RGR followed the trend, losing nearly 10% on Monday, as its shares fell $0.91 to trade at $8.51 per share staring off the new week.
COF – Capital One Financial Corp. ($10.01 to $12.05) 20%
Another of the financial stocks that posted a gain throughout the previous week was Capital One Financial Corp. (COF), which is a holding company whose subsidiaries provide a variety of financial products and services to consumers using its information-based strategy.
On Friday, the financial institution confirmed a report that the bank had finalized the acquisition of Chevy Chase Bank, which had previously been announced back in mid-December. With an extensive network in Maryland, Virginia and the Washington DC area, Chevy Chase has more than $13B worth of deposits that Capital One now has access to use.
In the agreement, Capital One would use $445M in cash and additional stock of the company to make the $520M purchase as COF continues their efforts to become a full-service bank. COF had previously been operating mainly as a credit card lender.
As the government tries to implement several lifelines for the banking industry, Capital One has been able to weather the financial storm, despite its shares plunging more than 80% from its yearly high of $63.50 set back in September 2008. Monday’s session pushed shares of Capital One closer to their 52-week low of $8.50 a share. With the markets all slipping more than 4% on the day, COF shares lost $1.95, or 16.2%, to trade at $10.10, 16% off its lows.
Worst 3 Stocks
NNI – Nelnet Inc. ($10.43 to $5.10) 51%
Nelnet Inc. (NNI), which is an educational finance company and is focused on providing quality student loan products and services to students and schools nationwide, had a rough week as the company’s stock price plummeted more than 51% during the week to close out at $5.10 per share.
Offering a broad range of student loans, financial services and technology-based products, including student loan origination and lending, guarantee servicing, and a suite of software solutions. Their products are designed to simplify the student loan process by automating financial aid delivery, loan processing, and funds disbursement.
The key catalyst to the downward trend over the past week was in direct response to President Obama’s proposal of eliminating private lenders from the federal government’s college loan program. Obama asked Congress to shift the entire lending program to government control by 2010, thus eliminating subsidies to banks. The plan would help save more than $4B a year according to his administration.
In an e-mailed response, Nelnet disagreed with the president's proposal and said it “believes federal loans should maintain the benefits of choice and competition.” Shares of NNI followed the news by setting a new 52-week low of $4.50 a share before rebounding slightly to close out the week. However, Monday’s trading session brought more dismay to the company, as shares set another new low at $4.06 per share, before recouping some of their losses to trade at $4.25 per share, still down $0.85 on the day.
PSYS – Psychiatric Solutions Inc. ($27.06 to $16.94) 37%
Another big percentage loser for the past week of trading fell onto Psychiatric Solutions Inc. (PSYS), which offers an extensive continuum of behavioral health programs to critically ill children, adolescents and adults. Through its ownership and operation of freestanding psychiatric inpatient hospitals and its management of psychiatric units within general acute care hospitals owned by others, PSYS saw their shares drop more than 37% for the week ending February 27.
On Thursday of last week, shares of PSYS plummeted more than 36% that day, losing $9.79 per share while setting a new 4-year low at $16.76. The sudden drop in share price came as a result of the company’s below expectations earnings report that showed a profit of $24M, or $0.43 per share on sales of $445.9M. Both profits and revenues were up from the previous year, yet came in under analysts’ projections of $0.54 per share on sales of $455.5M.
An additional cause for concerns with the stock is that the company revised their 2009 outlook downward as well, citing the continual pressures of the current market recession. PSYS previously stated a range of yearly earnings between $2.40 and $2.44 per share, and now expects to post an annual per share profit between $2.24 and $2.32 in 2009. On average, analysts are looking for a profit of $2.41 per share from Psychiatric Solutions.
Even with two analysts maintaining a “buy” rating on the stock, shares of PSYS set a new 4-year low during Monday’s trading session, falling an additional 22.4% to hit a low of $12.82. By late afternoon, shares of PSYS were down $3.79, to trade at $13.15 per share.
HPY – Heartland Payment Systems Inc. ($7.82 to $5.51) 30%
In a week filled with mixed emotions, Heartland Payment Systems Inc. (HPY), which provides bank card-based payment processing services to small- and mid- sized merchants in the U.S., saw their stock’s price slip more than 30%, despite a solid earnings report.
Heartland facilitates the exchange of information and funds between merchants and cardholders' financial institutions, providing end-to-end electronic payment processing services to merchants. The company’s practices also include merchant setup and training, transaction authorization and electronic draft capture, clearing and settlement, merchant accounting, merchant assistance and support and risk management.
In their company report, Heartland posted 4th quarter earnings of $8M, or $0.21 per share, up from the previous year’s profit of $6.8M, or $0.17 per share, with revenues increasing 13% year-over-year to $385.9M. As for the bad news, during the quarter, HPY revealed that there was a security breach within the company’s system used to process Visa, AmEx, and MasterCard and Discover Card transactions. The case is currently under an “informal” investigation by the SEC.
Although the breach did not involve merchant data, social security numbers, addresses or phone numbers, the breach may have influenced the CEO’s trading of the stock, which could be considered insider trading, if he had prior knowledge to the system’s breach.
The company further cut their quarterly dividend by 72%, from $0.09 to $0.025 for those of record on March 9. Finally, Heartland continues to back their yearly earnings forecast of $1.15 to $1.22 per share with revenues of $1.5B. Analysts, in the meantime, are looking for Heartland to post yearly earnings of $1.19 per share on annual sales of $1.69B.
By late afternoon, shares of HPY came within $0.02 of their 52-week low of $4.85 per share, before the stock inched higher to trade at $4.97 per share, down 9.8%, or $0.54 per share on the day.
2009 Better Trades Article
brought to you by
BRIAN MULLIN
