Wyatt Research Week in Review: July 5-11

As if things weren’t bad enough for the stock market lately, on Wednesday it simply stopped working.
A technical glitch forced the New York Stock Exchange to halt trading for 3 hours and 38 minutes midweek. The NYSE, which is owned by Intercontinental Exchange Inc., is attributing the Big Board malfunction to a software upgrade gone haywire.
But the timing of the shutdown raised a few eyebrows. Earlier Wednesday morning, a computer issue grounded United Airlines flights worldwide for more than an hour. And on Tuesday night, the international hacking group Anonymous had posted on its Twitter feed: “Wonder if tomorrow is going to be bad for Wall Street…. we can only hope.”
However, the Department of Homeland Security ruled out the possibility of a cyberattack, with Secretary Jeh Johnson stating, “The malfunctions at United and the NYSE were not the result of any nefarious actor.”
In a sign that the once dominant NYSE trading floor has lost a bit of its mystique, trading volumes were scarcely affected by the outage, with the Nasdaq and other electronic exchanges easily picking up the slack.
Yet it wasn’t exactly comforting for investors to see the world’s most famous stock exchange fall down on the job, while across the pond the Greek debt crisis continued its maddeningly irresolute course.
On the other side of the globe, things weren’t much better, with the epic implosion of the Shanghai Composite Index showing no signs of letting up. China’s major market benchmark has nosedived nearly 30% since reaching a high on June 12, with many unsavvy first-time retail investors losing their shirts on borrowed money.
As Wyatt Research analyst Tony Daltorio noted in Tuesday’s Daily Profit newsletter, the Shanghai market correction isn’t surprising, considering that it had doubled in value since June 2014 in the midst of China’s economic slowdown. While he doesn’t recommend jumping into Chinese equities in the near future, he also doesn’t advocate abandoning any investment in the world’s most populous country over the long term.
“After all,” he wrote, “Walking away forever from the Nasdaq after the bubble burst in 2000 was not a smart move in hindsight.”
And in the near term, Anonymous be damned, we can only hope that next week will be good for Wall Street.
Here are some of my favorite articles from the past week:
Warren Buffett’s Big Insurance Pivot – The insurance industry has been burning hot over the last few weeks. Aetna (NYSE: AET) and Humana (NYSE: HUM) are finally attempting to tie the knot after weeks of merger speculation. The second largest player, Anthem (NYSE: ANTM), is trying to buy the No. 5 player, Cigna (NYSE: CI). And let’s not forget the recently announced $28 billion mega-merger between ACE Ltd. (NYSE: ACE) and Chubb Corp. (NYSE: CB). But with the reinsurance industry being hit by a flood of competition, one of the biggest and most overlooked news items is that Warren Buffett’s Berkshire Hathaway (NYSE: BRK-B) is transitioning away from reinsurance and betting big on the future of commercial insurance.
The Greece Debt Crisis and Your Investments – The latest dilemma in the Greece debt crisis is the 3.5 billion euros Greece owes the European Central Bank by July 20. Failure to pay could result in expulsion from the European Union. But what impact does the Greek situation have on the average U.S. investor?
Smart Investors Will Lock In This Energy Giant’s 6% Yield – Shares of this high-yield energy giant have been pressured by Greece’s economic fiasco and weakening oil demand from China. But the reality is that Greece will eventually fade into the back pages of the financial press and China’s oil demand will pick up. Time to buy.
A Discounted Candy Stock With a Sweet Dividend – Though shares of this confectionery company are down 14% year-to-date due to slowing growth in China, it has paid 342 consecutive quarterly dividends and it increased its payout by 10% last year. It’s not often that this company is on sale, but investors looking for tasty dividends should put the stock on their shopping list.
Why I’m Not Buying the Top Media IPO in Years – The planned initial public offering of Univision, the largest Spanish language broadcaster in the U.S., could be the biggest media IPO we’ve seen in years. But there’s a big reason for Univision’s success in the form of an already publicly traded company, which could be the better investment opportunity.
Should You Go Out With the Match.com IPO? – With the planned Match.com IPO, investors will be able to buy into the greatest scheme on earth: charging people money to find love. IAC/InterActiveCorp (NASDAQ: IACI) plans to spin off its online dating Match.com subsidiary as The Match Group. However, only 20% of the unit’s shares are being offered, leaving the other 80% inside IAC. So the question is: Do you buy into the pure-play IPO, which is likely to offer high risk and high reward, or stick to the diversified media conglomerate?
ConAgra Gives Up on Private-Label Food Business – Activist investor Jana Partners has been pushing ConAgra Foods (NYSE: CAG) to make changes, and it looks like it will get its wish. ConAgra will reportedly sell Ralcorp Holdings, its disastrous private-label food business which it purchased in 2011 and from which it has since absorbed $2 billion in write-downs. But is it too little too late for the packaged-food giant?
Pharma M&A Goes Beast Mode – It looks as if there’s no end to pharma M&A mania. With Valeant Pharmaceutical International’s (NYSE: VRX) takeover approach to Zoetis (NYSE: ZTS), the M&A fad has spread to the animal health sector. It is believed that Valeant was urged to make an offer by activist investor Bill Ackman, who owns an 8% stake in Zoetis and a 5.7% stake in Valeant. Are there any other companies ripe for acquisition?
Have a great weekend!