Until emergency crews can stem the flow of oil that is leaking
from the broken well-head in the gulf, other drilling firms will
continue to see their shares under pressure. The Obama
administration has signaled that additional drilling permits may
not be issued in the region, which is bad news for any firms that
had ambitious plans for gulf coast exploration. For example, shares
McMoran Exploration (
are down another -10% in today's trading after a similar dip on
Friday. In fact, MMR has shed nearly half its value in the last six
weeks, partially due to persistent weakness in natural gas prices
Other firms affected include: Gulf coast equipment provider
Cal-Dive International (
, which took it on the chin Thursday and Friday but is holding its
Diamond Offshore (
, which is now down more than -10% in the last three sessions; and
, which is off nearly -4% today after falling more than -7% in each
of the prior two sessions.
Of course, if the oil spill is capped more quickly than is
currently expected, and sentiment for renewed drilling returns,
these stocks are likely to see a healthy snap back. It would help
to also have natural gas prices firm, though we are a few months
away from the peak summer season, when demand for natural gas
spikes. Any demand boost, coupled with gulf-related supply
constraints, could be the catalysts this group needs.
The flooding in Nashville, Tenn., this past weekend is likely to
generate large losses for many local businesses, especially those
that rely on tourism.
Gaylord Entertainment (
announced that its landmark Opryland complex will be closed for at
least several months. If the levee breaks, then the complex could
suffer even greater damage - in excess of the $50 million its
insurance policy would reimburse.
Shares of Gaylord had made a remarkable run as the company's
convention business showed signs of a solid rebound. But shares are
off by double-digits today, and investors should not seek to use
the weakness as a buying opportunity as shares still remain pricey
in relation to profits. Management is likely to be unable to
quantify the extent of the flooding damage in this evening's
After last week's resolution of the Puerto Rican banking crisis,
a pair of stocks are feeling the heat - for the opposite reason.
The FDIC auctioned off the assets of three weakened banks, and
Doral Financial (
is seeing its stock plunge by a third after failing to win any of
the bids for the assets. Often, a buyer of distressed assets can
yield great returns by acquiring new branches and picking off the
best loans in the portfolio. Doral's investors were hoping to
benefit from the FDIC's auction, which was tailor-made to please
Oriental Financial Group (
is also off sharply today, falling nearly -10%. Oriental was one of
the winning bidders, and investors didn't appreciate being on the
winning side of the bid, either. Go figure.
-- David Sterman
Disclosure: David Sterman does not own shares of any security
mentioned in this article.
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