It might not have been the biggest rally, but the Dow Jones Industrial Average jumped enough yesterday to push the index to a new multiyear high. The Dow rose 54 points to hit 14,035, its best close since 2007. That puts it well within striking distance of its all-time high of 14,151, a short 128-point rally away.
While the three companies below joined in the fun, all recording double-digit gains, resist the urge to high-five everyone in the cubicles next to you. Smart investors won’t celebrate until they know why their stock surged, because without a fundamental basis for the bounce, these stocks could just as quickly make the return trip down.
|SunPower Corporation (NASDAQ:SPWR)||16.9%|
|Power One Inc (NASDAQ:PWER)||19.2%|
At the office
Considering the state of the economy, the idea that three large office-supply companies could effectively compete against one another proved itself a more ludicrous idea daily. Rather than any one company prospering, all three were ailing. Staples, Inc. (NASDAQ:SPLS), as the largest of the bunch, would have been precluded from buying either of its rivals for antitrust reasons — it tried that once and was shot down — but the idea of its smaller rivals joining forces always held an allure, and that came to fruition yesterday as Office Depot Inc (NYSE:ODP) offered to buy OfficeMax for $1.2 billion, or around $13.50 a share.
The deal recognizes the problems facing big-box retailers as Amazon.com, Inc. (NASDAQ:AMZN) and other Internet rivals have invaded their turf. Indeed, Staples is the second-largest online presence in terms of SKUs behind Amazon. Analysts anticipate the merger will lead to a significant number of store closings, which would help not only the combined company, but Staples as well, which explains why its shares also rose 13% on the news.
While the agreement makes sense for the retailers, it still has to pass regulatory muster. The crippled industry might have staved off a good part of its demise had Staples been able to buy Office Depot in the late 1990s, but the FTC spiked the deal over fear of higher prices. An OfficeMax-Office Depot merger could lead to a similar outcome despite its obvious benefits.
Let the sun shine in
Both Power-One and SunPower were among the biggest gainers in the solar industry, which saw quite a few names in the space power higher. The problem is that there was no real news to account for the rise in their shares other than analysts turning more bullish on the sector. Power-One was the beneficiary of an upgrade to a “strong buy” from Raymond James yesterday, which said the inverter maker was “arguably the highest-quality public company in the space.”