ICT Group Inc. (Nasdaq:ICTG), Novavax Inc. (Nasdaq:NVAX) and Books-A-Million Inc. (Nasdaq:BAMM) are among the new 52-week highs in Wednesday's trading among companies with market capitalizations under $1 billion.[ More » ]
Also included among the results: Bon-Ton Stores Inc. (Nasdaq:BONT), Sinovac Biotech Ltd. (Nasdaq:SVA), FirstCity Financial Corp. (Nasdaq:FCFC), Atlantic Tele-Network Inc. (Nasdaq:ATNI), American Realty Investors Inc. (Nasdaq:ARL) and Nektar Therapeutics (Nasdaq:NKTR).
Interest rate concerns and inflation worries put pressure on stocks today after the government's sale of $19 billion had a harder than usual time getting buyers. Investors seem concerned about the government's growing debt and that it could spur higher inflation and interest rates.
The Dow lost 24.04 points to close at 8,739.02; the Nasdaq shed 7.05 points to end the trading session at 1,853.08; and the S&P was down 3.28 points for 939.15.
Stocks comprising the Russell 2000, comprised of the 2,000 largest small-cap stocks, brought the index down to 523.41 on a loss of 4.52 points.
Other small-cap leaders include one of yesterday's leaders, Satyam Computer Services (NYSE:SAY) up 35.7% after being rated "overweight" by an analyst from JP Morgan; American Axle & Manufacturing (NYSE:AXL), another of yesterday's leaders, up 25.7%; and Corel Corp. (Nasdaq:CREL) up 34.75%.
Decliners were lead by NCI Building Systems (NYSE:NCS) down 26.1% on worries over its reports of larger than expected Q2 losses. Shares were going for $3.16 at market close, down from an opening price of $3.80.
Other small-cap decliners include one of yesterday's leading gainers, Sequenom (Nasdaq:SQNM). Yesterday SQNM lead small-cap gainers with a 45.97% gain but today lead decliners by shedding 22.83% of its opening price to close at $4.09. And after shedding 20.17% off its price yesterday, Quiksilver (NYSE:ZQK) saw shares drop another 12.71%. So far this week investors holding shares in Quiksilver have endured a total loss of 27% since Friday's close.
*****"The worst is to come…"
That's what MetLife's (NYSE:MET) Chief Investment Officer Stephen Kandarian told Bloomberg this morning.
He was talking about commercial mortgage defaults. He notes that "[t]ypically there's a lag between when the economy softens and when the defaults actually occur."
Bloomberg also cites a study from Real Estate Econometrics LLC that forecasts default rates for commercial real estate may hit 4.1% by the end of the year.
What does commercial real estate have to do with an insurance company? Plenty…
*****Insurance companies take in cash in the form of the premiums we pay. They then invest that money in order to pay off claims down the road. As their investment returns compound, they profit.
But when their investments lose money, trouble starts. And trouble is exacerbated when insurance companies sell guaranteed returns to investors in the form of annuities.
The promise of annuities forces insurance companies to seek riskier investments to boost their returns. And many have turned to mortgage-backed securities to make more money.
*****MetLife has a $300 billion investment portfolio. That portfolio lost 23% in the first quarter of this year. Mr. Kandarian freely admits he's looking for higher returns to make up the losses. And he's looking at adding securities backed by commercial mortgages, in addition to continuing to originate loans to the commercial real estate sector.
It reminds me of the gambler, who after suffering a big loss, decides to start doubling down and taking more risks to win his money back. It usually doesn't end well.
Of course, what he should do is simply step away from the table. But MetLife and other insurers can't -- they have to make money to meet their obligations. It's not a sure thing, but I can imagine it ending poorly for some insurance companies.
After declining in morning trading, small-cap stocks began a rally around 10 a.m. ET, surging to more than 729. Better-than-expected earnings from several small-cap companies helped to act as a catalyst for the market rally. At 1:24 p.m. ET, the Russell 2000 (NYSE:IWM) was up 5.60, or 0.77%, at 729.95.
Despite the rally, several bearish indicators gave investors pause early in the session. Federal Reserve Chairman Ben Bernanke said late Monday that increasing home foreclosures might harm the economy. Adding to investors’ concerns was mortgage firm Fannie Mae’s (NYSE:FNM) reported a $2.2 billion loss on credit-associated costs, which enabled the company to post a wider-than-expected quarterly loss of $2.5 billion. Swiss banking giant UBS AG (NYSE:UBS) reported early Tuesday that it will cut 5,500 employees and sell $15 billion in risky debt to BlackRock, Inc. (NYSE:BLK) at 25% off its face value.
Among sectors, the big losers include airlines, water utilities, fabricated plastic and rubber materials producers and personal services firms. On the flip side, companies associated with oil and gas operations, coal, motion picture services, gold and silver were gaining ground.
Some of the firms that have broken out in Tuesday’s trading include China Finance Online Co. (Nasdaq:JRJC), which broke through $23 resistance and is now up about 9% at $23.94. After experiencing a sell-off at $56.75, vacuum and . . .
Obagi Medical Products Inc (Nasdaq:OMPI), Interline Brands Inc (NYSE:IBI) and Collective Brands Inc (NYSE:PSS) are among the biggest percentage losers in Tuesday's trading among companies with market capitalizations under $750 million.[ More » ]
Atlantic Tele-Network Inc (NYSE:ATNI), Cheniere Energy Inc (Nasdaq:LNG) and Patrick Industries Inc (AMEX:PATK) are also among the biggest percentage losers.
Here are the biggest percentage losers among small caps:
Connecting to the telecommunications sector is a challenge for investors, who have been jammed by losses from phone stocks all year. Hang on a moment, though: Atlantic Tele-Network, Inc. (Nasdaq: ATNI) is trying to get through.
Hello, Guyana? For 17 years, Atlantic Tele-Network has owned 80% of the equity of Guyana Telephone and Telegraph Company (GT&T) — the national telephone service provider and largest wireless service provider in the Cooperative Republic of Guyana. As a telecom specialist in small regions, Atlantic owns all of Commnet Wireless, LLC, which offers roaming services for U.S. and international carriers in rural areas throughout the United States.
With corporate offices in Salem, Mass. and St. Thomas, United States Virgin Islands, Atlantic also owns SoVerNet, which operates in New England. Other services include Choice Communications, LLC, in the Virgin Islands; Atlantic also owns nearly half of Bermuda Digital Communications Ltd.
The company has skulked to a 10% year-to-date loss, compared with the 13% decline in the S&P Global Telecommunications Sector Index Fund. Atlantic has been dragged down by sector and overall market weakness, and good news through the third quarter ended September already has been factored into values. Calls for an earnings growth slowdown this year can’t be ignored.
In early November, Atlantic said its revenues were up 14% for the quarter to $47 million, compared with the same time the previous year. Net income increased by 15% to $0.61 per diluted share. The company's revenue was up 19% for the nine months through September, and net income on a per-share basis was up 32%. Fourth quarter results are expected Thursday.
That’s solid growth, and there will be more to come if the company pulls off plans for both its U.S. and Caribbean operations. In the United States, Commnet Wireless is key: Atlantic said in September that it would sell cell sites in two Midwest states to a carrier, and agreed — in exchange for a long-term roaming agreement — to build a network in rural areas in three states.