PetSmart, Netflix, Regeneron Pharmaceuticals, E Trade Financial, and Freeport-McMoRan were the hot stocks this past week
The S&P 500 Index (SPX) gained 1.25% in the last week to close at 1,985.44 on July 3, 2014. Here are the top five gainers of the index for the week:
Specialty retailer PetSmart, Inc. (PETM) gained 10.35% this week, after Jana Partners LLC disclosed that it bought a 9.9% stake in the company on July 3. The activist fund, which is now the largest PetSmart shareholder, wrote in its SEC filing that it bought such a significant stake because it felt the company’s “shares are undervalued and represent an attractive investment opportunity.”
Jana Partners, which backed the recent sale of Safeway Inc. (SWY), plans to hold a meeting with PetSmart’s management to discuss the future plans of the company, such as potential sales, a review of operational performance, and options for optimal capital structuring.
Regeneron Pharmaceuticals Inc
Regeneron Pharmaceuticals Inc (REGN) rallied 12.21% this week as France-based drugmaker Sanofi SA (SNY) disclosed on July 1 that its stake in the company had increased from 20.5% to 22.5%. Sanofi had been buying Regeneron’s shares in May and June at prices that were capped at $303.28. The sales are part of an agreement that will let Sanofi own 30% of the company.
E Trade Financial Corporation
E Trade Financial Corporation (ETFC) stock rose 7.87% and closed at $22.77 on Thursday. Some of the gains are attributable to the fact that investors continue to regain confidence, after the Senate Permanent Subcommittee on Investigations questioning hinted that laws will not be changed in ways that will make it difficult for online brokers like E Trade financial to operate. The subcommittee began probing high-frequency trading and the possible impact on markets when Michael Lewis’s non-fiction book, “Flash Boys: A Wall Street Revolt,” asserted that the stock market is artificially engineered.
Other reasons for the stock price gain include Standard & Poor's raising its outlook on the company to stable, and also improving its grading from B- to B on June 30, 2014.
Analysts project profits will improve by an average of 20% for online and discount brokers, as speculation that rising share prices and the lowest volatility since 1986 is expected to lure investors. E Trade’s profits have increased in times of low volatility. Its earnings rose 41% between 2004 and 2006, during which time the Chicago Board Options Exchange Volatility Index (VIX) was over 13. VIX has been below 12 this past week, and its 20-year average is about 20.
Freeport-McMoRan Copper & Gold Inc.
Freeport-McMoRan Copper & Gold Inc. (FCX) stock rallied 7.87% to close at $38.51, after the company confirmed on July 2 that its CEO, Richard Adkerson, was still in talks with the Indonesian government over copper-related exports. Freeport froze copper production in Indonesia in January, after the government began to levy export taxes and tightened mining related regulatory policies to coerce Freeport into building processing plants in Indonesia.
Rumors that Freeport will sell its copper mine in Chile in order to reduce its debt burden as promised abounded on July 3, sending the stock price upward. Adkerson has also indicated that the company will be looking to expand its operations in the US as it diversifies from its copper, gold, and metal mining business to venture into oil and gas production.
The online TV streaming service provider reached a new high of $475.87 (market cap of $28.4 billion), following the news. Goldman Sachs also raised its price target on Netflix stock to $590, an upside of 24% from June 30, 2014’s closing price. The revised target price denotes a 55% increase from the earlier estimate of $380. The upgrade comes on the back of Netflix’s expanding subscriber base, rising international footprint, and improving margins.
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