Image source: Shake Shack.
One of the most-interesting facets of the current bull market
is the extent to which stocks manage to bounce back from
short-term challenges in trading. Major market benchmarks fell
sharply Thursday morning, and investors seemed concerned by the
Federal Reserve's assessment of the U.S. economy as being
vulnerable to potential problems like the possible British exit
from the European Union.
Yet even though the Dow was down almost 170 points at one
point during the trading session, stocks bounced back despite the
gloomy mood. By the end of the day, the Dow and S&P 500 were
both up between a third and a half percentage point. Many
individual stocks did better, and
(NYSE: SHAK) ,
(NASDAQ: VIAB) , and
(NASDAQ: QLGC) were among the best performers in the market on
Shake Shack rose 5% after the new burger chain received
positive comments from an analyst firm. Buckingham Research noted
that, even though Shake Shack has seen its stock fall
substantially from its IPO price, the burger chain has already
inspired a loyal following that gives the company almost
cult-like status among its customers.
That kind of marketing success based on word of mouth and
popular perception is almost impossible to create artificially,
and it speaks to the growth potential that Shake Shack has as it
aims toward making expansion plans a reality. With fewer than 100
locations, Shake Shack has plenty of room to expand before having
to worry about saturation. If its new locations can sustain the
momentum of its popularity, then Shake Shack investors could get
the last laugh.
Viacom finished up 7% in the wake of a partial resolution of a
dispute between Sumner Redstone and company executives. Redstone,
who controls a majority of the voting rights for Viacom, elected
five new directors to the Viacom board. Among those replaced was
Chairman and CEO Philippe Dauman. Redstone looked for a Delaware
court ruling to confirm that he had the authority to replace the
directors in accordance with the bylaws of the company.
Some will argue that the move can't take effect until a formal
special meeting of the shareholders of the company takes place;
but any such moves would only delay the inevitable. Investors,
meanwhile, appear pleased that the long-standing issue is
starting to get resolved, regardless of the actual outcome.
Finally, QLogic gained 9%. The company agreed to a merger bid
for $1.36 billion, which values QLogic at roughly $15.50 per
share. The terms of the bid include $11 per share in cash for
QLogic shareholders, along with just less than a tenth of a
Cavium share for every QLogic share held. QLogic executive chair
Christine King said that, "the scale of operations of a nearly $1
billion revenue business will allow the combined company to
deliver better solutions for customers."
Meanwhile, Cavium expects that the deal will be accretive to
its adjusted earnings by next year, giving the company a chance
to add QLogic into its mix, and scale up in the data center and
storage markets. For QLogic shareholders, cashing out of more
than 70% of their stake at a premium to where the stock traded
previously looks like a reasonably good deal going forward.
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