Just when you thought the Euro zone story couldn’t get any weirder, it did.
After agreeing to bailout terms from the European Union and EFSF (European Financial Stability Facility) last week that set off a huge rally in stocks, Greek Prime Minister George Papandreou (G-Pap) shocked the market over the weekend by announcing plans for a referendum to let Greek citizens vote on whether or not to accept the package.
And as if that’s not disruptive enough to a market that thought a deal with Greece was in the bag, G-Pap also went ahead and announced that the vote would happen sometime in January.
Greek Prime Minister or not, is this guy completely insane? Oh sure, the entire global economic and financial community has absolutely no problem waiting for two months on a vote that may or may not be approved, because keep in mind, voters don’t have a real strong history of stripping themselves of entitlements, which is a crucial part of the bailout package.
So at any rate, the bottom line is that Greece continues to stray from the path of sanity. The European Union and EFSF have made it very clear that they have no intention of waiting around for a few months while Greece twittles its thumbs. But the longer that confrontation carries on the higher probability that core EU members France and Germany are going to say “to hell with it” and just boot Greece out of the union and let it fend for itself.
Unfortunately that’s good for no one, not Greece, not the U.S. and not China. So in spite of what seemed like sharp progress in October in the Euro zone, we are basically back to dealing with total chaos and uncertainty.
But in spite of general market volatility, certain stocks continue to perform well.
Updates:
Kansas City Southern (KSU) continues to trade like a rock star, building on its strong momentum from October and hitting a new all-time high. The gains come on the heels of strong Q2 results that saw revenue increase 24% from last year earnings come in 4% ahead of expectations. The longer-term picture looks good too, with analysts projecting 23% earnings growth in 2012.
Checkpoint Systems (CHKP) is also looking strong, with shares pressuring the all-time high just above $61 on strong Q3 results and a solid 12% growth projection. The maker of enterprise and Internet security systems is handily outperforming the market this year with a very hefty 26% gain.
Cimarex Energy Co (XEC) had an interesting week, reporting earnings that were in line with expectations and basically flat from last year. But the Street seemed a little less than impressed with the results, popping XEC for a 9% loss on Thursday. That’s the bad news. Here’s the good news. Shares bounced back 4% on Friday in a down market. Bigger picture, this stock has been under pressure for most of the last 5 months on concern over global economic growth, falling from a 52-week high of $116 to a recent low of $54.
But in spite of the volatility, earnings have remained mostly the same, making this a pretty compelling value play. Longer term, resource companies should perform well as global population growth and inflation put a bid into hard assets. For the time being, XEC has been a bit tough to love, but that’s the volatility investors have to live with when looking for outsized gains.
Shifting back into some good news, we’re seeing signs of life from EZCorp (EZPW), gaining 2% on the week after falling the previous two on concern over the regulatory environment surrounding the pawn and payday lending industry. We’ll get a good update on the company’s business on Tuesday, Nov 8 with its Q3 results, so that will help us get a better handle on how EZcorp is holding up in the shaky economy.
And finally, we have Intercontinental Exchange (ICE), trading near its multi-year high after reporting another great quarter. The leading derivatives exchange saw record revenue and earnings that came in 6% ahead of expectations. And the real kicker on ICE is that when marker volatility increases, the company makes more money. Sounds like a strong counter-cyclical play to me. We’ve got some solid upward momentum in ICE, so with a little help from the market we should see a new multi-year high before long.
That’s it for this week. Until next time, here is an article on Groupon’s big IPO from Thursday. We live in crazy times, because I am trying to figure out how a company that loses money every quarter is being valued at $17 billion. Well, who knows, but if that’s what going on, then we all need to find a way to start extremely unprofitable business so that we can take them public and become billionaires.
Enjoy!
Your Investment Partner,
Mike
