January 8, 2001
MAINE STOCK TRENDS
Revenue warnings fail to dampen enthusiasm for Fairchild stock
Copyright © 2001 Blethen Maine Newspapers Inc.
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When a stock moves up on bad news, does it mean anything? A lot of successful investors say that it is good news. That's exactly what happened to the shares ofFairchild Semiconductor (FCS-$16.56) last week. After the market closed on Friday, Jan. 5, Fairchild announced that it would not meet revenue expectations for the quarter that just ended on Dec. 31. The company said it expected the earnings weakness to continue into the first quarter of 2001, at the least. That announcement followed two assurances from management that earnings expectations would be met. What happened to the stock price after the warning? On the first day of trading after the announcement (Monday, Jan. 8), the stock closed down just $.29 after trading as low as $13.81 that day. By the end of the week, the stock had moved up 1.56 points to close at $16.56, posting a gain of 10.42 percent for the week. Such a price move in the face of bad news is pretty bullish for the stock in the opinion of technical analysts. So far this year, the stock is up 14.7 percent.
Fairchild's trading volume on the 8th was 947,800 shares. That was strong, but not nearly as strong as the 5.2 million shares that we saw during the four consecutive trading days last month surrounding the day when the stock hit its all time low of $11.19. Those numbers show a great deal of the stock changed ownership from shareholders who held the stock at a loss to buyers who now own the stock at low cost and who won't be tempted to sell as the stock moves higher in price.
What happened last month is beginning to look like the makings of a bottom in Maine's leading high tech company. The fact that the stock tested its lows successfully last week and then finished the week higher is very encouraging — particularly given that the test was due to bad news.
From the time that the stock first fell below $16 per share on Nov. 29 until last week, Fairchild stock traded more than 32 million shares, averaging about 1.1 million per day. For the year just ended, the stock traded 218 million shares. That includes a 12 million share trading day last January (when the stock was about $34 — on its way up to $49) as well as a 6 and an 8 million share trading day in October (when the stock was on its way down). Trading volume averaged 868,747 shares per day over the entire year. All of this helps build a case for Fairchild having seen its low.
I-Many (IMNY-$11.88) rallied last week. Jan. 9 was the date that a "lock up" expired. The lockup refers to a time period from the July initial public offering during which time restricted (insider) stock couldn't be sold. After the day passed uneventfully, the stock rallied later in the week to close 19.5 percent higher for the week. Aiding the cause was a press release from the company that it has introduced new software that enables its contract purchasers to easily monitor any payments that are in dispute on their invoices.
Merrill Merchants Bancshares (MERB-$10.50) moved up 10.5 percent last week. There was no news from the company and the stock only traded 6,300 shares all week.
IDEXX Labs (IDXX-$23) moved up 8.55 percent last week. There was no news that we could find on the stock.
IDEXX is another interesting volume study. As I've mentioned in previous columns, IDEXX has traded within a fairly narrow range over the past year. The stock has found support in the low 20s. It runs into resistance in the high 20s. Last year, the daily trading volume averaged a little over 300,000 shares. Last month, while testing that support in the low twenties, the stock saw its volume rise to an average of nearly 500,000 shares. It wasn't enough difference to mean a great deal, but it caught our eye in the sense that increased trading volume represented about a 55 percent increase from the norm, and it occurred while testing the lows.
On the downside, Intelligent Controls (ITC-$1.06) fell 19.5 percent to lead the list of declining local stocks last week. Volume here, too, is worth mentioning. Except in INCON's case, it was low volume — the stock traded just 100 shares last week, so the decline is hardly meaningful. One hundred shares of INCON, incidentally, represents a total dollar volume of $106.25.
While it wasn't among the high percentage moving stocks last week, the shares of UnumProvident (UNM-$24.44) have been weak recently. Since trading as high as $29.75 on Nov. 9, the stock has fallen about 18 percent. That $29.75 is the highest that the stock has traded since about this time last year, prior to when the company's disastrous year-end (1999) results were reported. There isn't much doubt, at this point, that the stock reached its low last March in the $11-14 range. But, it is a concern that both the stock's 50-day and 100-day moving averages have turned negative in recent weeks. And, the stock currently trades below its 200-day moving average.
UnumProvident stock experienced what should be a major bottom when it reached its lows last winter. The stock has been in an uptrend since then. But, as can be seen by the solid green uptrend line on the accompanying chart, the stock has also recently broken out of this uptrend. What's disturbing about these technical breakdowns in the stock is that there has been no news to account for the poor stock performance. A six-month chart of the stock doesn't offer much encouragement, either. Since reaching its recovery high on Nov. 9, the stock shows a pattern of lower and lower lows as well as attempts to penetrate the previous highs. All of those attempts failed.
What's also disturbing about the stock's recent price performance is the performance of other stocks within the life insurance industry. Over the past three months, Conseco (CNC-$14.69) is up 128 percent; ING Group (ING-$78.94) is up 25.9 percent; MetLife (MET-$31.00) is up 24 percent; and Sun Life of Canada (SLC-$21.75) is up 19.2 percent. Sun Life, though, is showing some weakness. Other than Lincoln National Company (LNC-$40.44) most of the industry has moved higher over this time period. A lot of the strength can be attributed to investors pulling money out of tech stocks in the fourth quarter and then, reinvesting the proceeds into more stable companies. Obviously, UNUMProvident wasn't seen as one of the more stable companies. Of course, since the June 30, 1999 merger occurred between Provident and UNUM, management has fallen short of estimates for three of the six reporting quarters.
Finally, American Skiing Company (SKI-1.56) filed a registration statement with the Securities and Exchange Commission last week regarding its pending merger with MeriStar Hotels & Resorts (MMH-2.50). The merger is expected to be completed in this first quarter of 2001. A shareholder meeting will be held in Newry, Maine at a yet to be determined date, presumably during either February or March.
This will be a shortened trading week. The market is closed Monday in observance of the Martin Luther King remembrance.
Brad McCurtain is president of Maine Securities Corporation. Maine Securities Corporation is an investment firm specializing in Maine's securities. From time to time, the corporation, its employees, and its clients may buy, hold, and/or sell positions in companies mentioned herein. As a regulated securities broker/dealer, the company and its employees are required to abide by all securities regulations at all times when communicating with the public. Brad McCurtain may be reached at info@MaineSec.com. Web site: http://www.MaineSec.com