You'll often see all of the same companies within a similar
sector trade in tandem. That's why many investors buy stock in
company B after their rival, company A, blew past estimates. But
that logic failed to hold for investors in
Hutchinson Technology (Nasdaq: HTCH)
, which supplies subcomponents to disk drive makers such as
Seagate Technology (
Western Digital (
. Those firms are seeing robust demand, as we previously noted. But
Hutchinson had some manufacturing glitches that led its customers
to shift business to other vendors, leading to an unexpected loss
and a -20% swoon in its shares.
Although management insists that Hutchinson's problems are
short-term in nature, shares are likely to stay in the penalty box
for at least a few more quarters. If you want exposure to the disk
drive sector, you may as well stick with the names noted above, as
they are also inexpensive when judged by traditional valuation
Whither our love affair with the buffalo wing? Even the most
diehard fans of the ubiquitous pub grub need to take a break, and
they did that in droves, as same-store sales at
Buffalo Wild Wings (Nasdaq: BWLD)
fell a few points in April, and foot traffic fell by more than -5%,
from a year ago. That sent shares, which have long been favored by
momentum investors, into a tailspin today, falling roughly -20%.
That's great news for short investors, who had held nearly a
quarter of the company's shares, according to recent data.
Even after the price plunge, shares still don't look cheap, trading
at more than 20 times likely 2010 earnings per share of around
$1.90. To once again garner a loftier earnings multiple, management
would need to deliver plans for renewed growth in store openings
and same-store sales. And that may prove difficult in light of the
near saturation of neighborhood bars selling buffalo wings.
is giving us another lesson in trading strategies. Shares sharply
fell Tuesday as quarterly results badly missed forecasts. A sudden
drop tends to bring out value investors in the next trading session
on hopes that the selling is done. But many times, it can take a
large fund several days to exit an investment, which appears to be
happening with Unisys. After falling -20% Tuesday, shares opened
slightly higher this morning, but have been in freefall ever since
and are now down more than -5%. Shares could remain under pressure
until the current shareholder base of technology investors washes
out and the new base of value investors rolls in. And that could
take some time.
-- David Sterman
Disclosure: David Sterman does not own shares of any security
mentioned in this article.