I have identified five interesting stocks that have seen above average volume in the last week. I picked these five stocks because they are each battling important headwinds. While Baidu (BIDU, Financial) is simply overvalued, Cliffs (CLF, Financial) and United Continental (UAL, Financial) reported some ugly statistics for the month of January. Additionally, Walgreens (WAG, Financial) is trying to figure out how to make money without Express Scripts (ESRX, Financial) clients, and Transocean (RIG, Financial) is having significant legal issues.
Cliffs Natural Resources is a producer of steel and iron that has had an average volume of 3,111,340. One recent headline for the company has been its decision to forgo a project in the Upper Peninsula of Michigan. The plant would've served as a supplier of raw materials, but Cliffs is actually going to cancel the corresponding joint venture with Kobe Steel. Another important story for Cliffs has been its announcement of poor outlook going forward. Specifically, the company says that prices and volume for its ore are on the low end of prior estimates. The Eastern Canadian iron ore unit is seeing particularly reduced volume, and the Wabush Mine has had a number of problems with its operations. On the other hand, coal volume and revenue per ton for North America are doing well. In my opinion, investors should look beyond those short-term numbers and see the big pictures. Cliffs has a significantly lower price to earnings ratio (5.39) than similar companies like Alpha Natural Resources, CONSOL Energy, and Peabody Energy. Furthermore, Cliffs boasts terrific margins - those numbers are 42.1% gross and 38.58% operating. With a dividend kicker of $1.12 annually, this stock should benefit from increasing demand for steel and iron in the emerging markets.
Baidu is a Chinese provider of Internet search services. The stock has had an average volume of 5,691,060, and Brean Murray analyst Fawne Jiang is increasing her price target on the stock to $200. Ms. Jiang is moving her predictions for higher average revenue per user higher and also noted that the Chinese New Year probably helped the company's business. I am inclined to agree with Ms. Jiang, and it appears that certain economic trends are working in Baidu's favor as well. Specifically, many of the industries that are increasing their advertising are also the ones that tend to use Baidu. Meanwhile, Baidu offers some interesting value metrics right now. The stock has a price to earnings ratio of 53.9 and price to sales ratio of 24.69, while Sohu.com has a price to earnings ratio of 12.81 and price to sales ratio of 2.28. Based on this large disparity, I find it hard to recommend buying Baidu right now. The company certainly has an immense amount of growth ahead of it, and margins are very good (80.53% gross and 52.53% operating). On the other hand, the current price of over $140 is simply too much for me. I recommend investors wait for the next earnings report to come out before making a move on this stock.
United Continental Holdings is a major airline that has had an average volume of 6,522,180. One important headline for the stock has been its generous profit-sharing plan. Indeed, $265 million of profits will be given out as bonuses, and eligible employees will receive approximately an extra 5% of their salary. This move figures to make United Continental's employees happy, and shareholders have been pleased too due to the company's latest traffic report. While January traffic was down 3.2% on a year-over-year basis, although revenue per passenger-mile did increase by between 8.5 and 9.5%. Now that I've talked about employees and shareholders, I think it's worth mentioning that United Continental is also treating its customers well. As discussed here, United Continental has been accommodating to passengers whose flights were delayed/cancelled due to poor weather in the Northeast. Not only is United Continental running its business well, but also the stock is attractively priced. The price to earnings ratio of 10.44 is lower than for other stocks like Delta Air Lines and US Airways. Furthermore, United Continental has a higher gross margin (26.73%) than Delta (20.08%) and US Airways (18.20%), and that doesn't even include United Continental's most recent prices increases.
Walgreen is a chain of drug stores that has had an average volume of 9,459,050. One recent headline for this company has been its new online advertising plans. Indeed, Walgreen is adding "hundreds of additional items" to its online set of coupons. As more people shop online and browse the Internet on smartphones, having a strong online strategy is crucial, and it appears that Walgreen understands this. More importantly, however, Walgreen is still feeling the fallout from refusing to work with Express Scripts . Indeed, Citi analyst Deborah Weinswig has downgraded the shares to a Sell rating, noting that the company's prescription business will take a serious hit. The problem is that Walgreen doesn't seem to be offering competitive prices versus those who use Express Scripts at other drug stores. Regardless, Walgreen does offer a nice 2.6% dividend yield, and the savings from not working with Express Scripts could allow Walgreen to increase its dividends. The company had $3.643 billion of operating cash inflow in fiscal year 2011 and $809 million of operating cash inflow in the three months after that, so Walgreen is clearly in a position of financial strength right now. In fact, large amounts of money were used to buy back stock, which should be taken as a sign of confidence from management.
Transocean is a provider of oil and gas drilling services that has had an average volume of 7,426,790. The company is still dealing with the aftermath of the Deepwater Horizon oil spill, and the company is now asking BP well site leader Donald Vidrine to testify what happened prior to the explosion of the Macondo well. While Mr. Vidrine has refused to testify due to medical issues, Transocean released the following statement: "[Vidrine] is a key source of information regarding critical events and operations that occurred immediately prior to the blowout. Mr. Vidrine's medical issues do not provide a legal basis for his refusal to testify." As the owner of the equipment that exploded, Transocean will probably need to accept some blame for the oil spill. Regardless, from an investing perspective, Transocean should provide shareholders with some serious income going forward. The stock has a dividend yield of 6.3%, and the company has proven time and time again its ability to be profitable. Operating cash inflow was $3.946 billion for 2010 and $1.222 billion for the first three quarters of 2011. Because Transocean's services are in high demand right now, I think Transocean might even increase dividends once its court liabilities are cleared up.
Cliffs Natural Resources is a producer of steel and iron that has had an average volume of 3,111,340. One recent headline for the company has been its decision to forgo a project in the Upper Peninsula of Michigan. The plant would've served as a supplier of raw materials, but Cliffs is actually going to cancel the corresponding joint venture with Kobe Steel. Another important story for Cliffs has been its announcement of poor outlook going forward. Specifically, the company says that prices and volume for its ore are on the low end of prior estimates. The Eastern Canadian iron ore unit is seeing particularly reduced volume, and the Wabush Mine has had a number of problems with its operations. On the other hand, coal volume and revenue per ton for North America are doing well. In my opinion, investors should look beyond those short-term numbers and see the big pictures. Cliffs has a significantly lower price to earnings ratio (5.39) than similar companies like Alpha Natural Resources, CONSOL Energy, and Peabody Energy. Furthermore, Cliffs boasts terrific margins - those numbers are 42.1% gross and 38.58% operating. With a dividend kicker of $1.12 annually, this stock should benefit from increasing demand for steel and iron in the emerging markets.
Baidu is a Chinese provider of Internet search services. The stock has had an average volume of 5,691,060, and Brean Murray analyst Fawne Jiang is increasing her price target on the stock to $200. Ms. Jiang is moving her predictions for higher average revenue per user higher and also noted that the Chinese New Year probably helped the company's business. I am inclined to agree with Ms. Jiang, and it appears that certain economic trends are working in Baidu's favor as well. Specifically, many of the industries that are increasing their advertising are also the ones that tend to use Baidu. Meanwhile, Baidu offers some interesting value metrics right now. The stock has a price to earnings ratio of 53.9 and price to sales ratio of 24.69, while Sohu.com has a price to earnings ratio of 12.81 and price to sales ratio of 2.28. Based on this large disparity, I find it hard to recommend buying Baidu right now. The company certainly has an immense amount of growth ahead of it, and margins are very good (80.53% gross and 52.53% operating). On the other hand, the current price of over $140 is simply too much for me. I recommend investors wait for the next earnings report to come out before making a move on this stock.
United Continental Holdings is a major airline that has had an average volume of 6,522,180. One important headline for the stock has been its generous profit-sharing plan. Indeed, $265 million of profits will be given out as bonuses, and eligible employees will receive approximately an extra 5% of their salary. This move figures to make United Continental's employees happy, and shareholders have been pleased too due to the company's latest traffic report. While January traffic was down 3.2% on a year-over-year basis, although revenue per passenger-mile did increase by between 8.5 and 9.5%. Now that I've talked about employees and shareholders, I think it's worth mentioning that United Continental is also treating its customers well. As discussed here, United Continental has been accommodating to passengers whose flights were delayed/cancelled due to poor weather in the Northeast. Not only is United Continental running its business well, but also the stock is attractively priced. The price to earnings ratio of 10.44 is lower than for other stocks like Delta Air Lines and US Airways. Furthermore, United Continental has a higher gross margin (26.73%) than Delta (20.08%) and US Airways (18.20%), and that doesn't even include United Continental's most recent prices increases.
Walgreen is a chain of drug stores that has had an average volume of 9,459,050. One recent headline for this company has been its new online advertising plans. Indeed, Walgreen is adding "hundreds of additional items" to its online set of coupons. As more people shop online and browse the Internet on smartphones, having a strong online strategy is crucial, and it appears that Walgreen understands this. More importantly, however, Walgreen is still feeling the fallout from refusing to work with Express Scripts . Indeed, Citi analyst Deborah Weinswig has downgraded the shares to a Sell rating, noting that the company's prescription business will take a serious hit. The problem is that Walgreen doesn't seem to be offering competitive prices versus those who use Express Scripts at other drug stores. Regardless, Walgreen does offer a nice 2.6% dividend yield, and the savings from not working with Express Scripts could allow Walgreen to increase its dividends. The company had $3.643 billion of operating cash inflow in fiscal year 2011 and $809 million of operating cash inflow in the three months after that, so Walgreen is clearly in a position of financial strength right now. In fact, large amounts of money were used to buy back stock, which should be taken as a sign of confidence from management.
Transocean is a provider of oil and gas drilling services that has had an average volume of 7,426,790. The company is still dealing with the aftermath of the Deepwater Horizon oil spill, and the company is now asking BP well site leader Donald Vidrine to testify what happened prior to the explosion of the Macondo well. While Mr. Vidrine has refused to testify due to medical issues, Transocean released the following statement: "[Vidrine] is a key source of information regarding critical events and operations that occurred immediately prior to the blowout. Mr. Vidrine's medical issues do not provide a legal basis for his refusal to testify." As the owner of the equipment that exploded, Transocean will probably need to accept some blame for the oil spill. Regardless, from an investing perspective, Transocean should provide shareholders with some serious income going forward. The stock has a dividend yield of 6.3%, and the company has proven time and time again its ability to be profitable. Operating cash inflow was $3.946 billion for 2010 and $1.222 billion for the first three quarters of 2011. Because Transocean's services are in high demand right now, I think Transocean might even increase dividends once its court liabilities are cleared up.
