Mar 27, 2015
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Last week’s rally that corresponded to the Federal Reserve lowering estimates for future interest rate increases ended abruptly on Wednesday. The question of corporate growth rates was raised by a contraction in the durable goods orders for the month of February. The drop was actually over twice as much as the remaining year over year growth rate. With first quarter earnings reports coming in April, portfolio managers appear anxious about how to price the shares of companies whose growth rates may be stalled. The sell off mid week after the durable goods report was more pronounced for the Nasdaq Index indicating that without growth the forward earnings yield, rates of return, are lower. Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders
A great example of the aggressive re-pricing is the sell off in memory titan Sandisk
Energy investors were given clear signals about potential dangers ahead for the rest of 2015 with two shareholder air pockets spilling substantial value almost instantly. Denver based Whiting Petroleum had rallied to about $40 after Whiting essentially put the company for sale. In a move that confirmed no one wants to even court Whiting, the company announced it would sell 35 million additional shares and issue $1.75 Billion in new convertible (further dilution) debt. Shareholders lost about 25% of their value almost instantly. Dallas based Enlink, created by the merger of Devon and Crosstex mid stream pipeline assets, lost about 10% mid week upon the announcement that they were issuing shares as well. The scramble to raise capital quickly indicates CFO’s may be anticipating that access to capital for energy companies is drying up.
- Nuveen Asset Management
- Symphony Asset Management