Market Wrap-Up for July 2 (AYI, NLSN, F, LINE, more)

Market Wrap-Up for July 2 (AYI, NLSN, F, LINE, more)


Though the market opened in the red, some positive economic data (factory orders, housing prices, auto sales) came through the wire early today, spurring buying from investors. However, those gains were eventually wiped away by a late day sell-off that dragged the major indices into negative territory.

Nonetheless, stocks bounced off of their lows to close about flat for the day.

Acuity Brands (AYI) shares surged today, after the lighting fixtures maker reported third quarter earnings.

Shares of Nielsen Holdings (NLSN) also rallied today on news that it will be replacing Sprint on the S&P 500 index.

Furthermore, Ford (F) shares closed in positive territory after it beat June auto sales estimates.

On the downside, however, was Linn Energy (LINE), after it said it is being investigated by the SEC over a pending acquisition. Its shares fell more than 19% heading for the day, hitting fresh 52-week lows.

Wall Street analysts’ upgrades of J.P. Morgan Chase (JPM), Prosperity Bancshares (PB), and Polaris Industries (PII) sent those stocks higher. Meanwhile, downgrades of Newmont Mining Corp (NEM), Goldcorp (GG), and CME Group (CME) dragged those shares into the red.

Be sure to check the Dividend Daily for all the latest earnings reports, analyst moves, and much more.

Watch Out for the Latest Trends

Shares of embattled social gaming developer Zynga (ZNGA) have been on a tear over the past 24 hours, up about 18, after it was announced that founder and CEO Mark Pincus will step down and be replaced by former Microsoft executive Don Mattrick. Investors are hoping that Mattrick will be able to utilize his experience with the XBox gaming console to help Zynga break through after a year and a half of struggles.

Zynga shares have not had much success since the company’s initial public offering in December 2011, down some 65% since then, as the company has failed to adequately monetize its products to drive revenue and earnings growth. It has been one of the worst-performing IPOs of the past several years. But this latest executive shake up seems to have investors ignoring the past.

This sudden spike in share price may be alluring some investors to initiate positions in shares of the maker of FarmVille, Mafia Wars, CityVille and other popular social games. Investors may be thinking that Mattrick’s guidance will help the company finally beat top and bottom line estimates. As such, they believe they can benefit by buying at the bottom, hoping to cash in on the subsequent rally down the road. However, if the company has not been able to deliver over the past year and a half, who says that can guarantee such a rally in the future, regardless of the CEO?

Dividend-focused investors should be hesitant to jump into positions in a company like Zynga, even though the market has shown some optimism in the stock over the past two days. It’s best not to make a a spur of the moment investments just because the company is getting a lot of attention from traders and the media. The stock still remains a sub-$5 play with a lot of questions going forward regarding its operations and business model. Though there are some rumors that Zynga could use some of its capital to payout a dividend or buyback shares, it does not have the fundamentals to warrant a long-term investment — especially for dividend investors.

As income investors, we want to invest in companies that can continue to deliver earnings and revenue growth and consistent and increasing dividends quarter after quarter. Zynga, for now, does not provide anything resembling those fundamentals. The bottom line is: don’t be allured by the latest hot trend in the markets.

Don’t forget to follow me on Twitter @mtflannelly.

Thanks for reading everybody. We’ll see you tomorrow!

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