Why Are These Four Stocks Plunging Today?

Given the unseasonably warm winter and the weak global macro-economic climate, demand for crude is weaker than before. Given Saudi Arabia’s insistence on pumping as much crude as possible and Iran’s impending 0.5-1 million bpd of incremental exports next year, supply is also higher than it should be. Compounding the supply and demand problem are oil inventories, which sit at multi-decade highs. Although midstream companies are more insulated from the commodity price carnage than E&P producers, they still have taken a big hit nevertheless. Shares of Energy Transfer Equity LP (NYSE:ETE) are down by another 8.77% today as investors worry that the company could do a ‘Kinder Morgan’ and cut its dividend distribution in light of the challenging industry conditions. While Energy Transfer Equity LP (NYSE:ETE) shares only yield 8.7% (not yet in danger territory), any additional increases in the yield will make financing the company’s growth capital expenditures more expensive. Bulls need for crude prices to bottom in order for this stock to do well.

Shaw Communications Inc (USA) (NYSE:SJR) shares have declined by some 10% after the telecom announced it is acquiring Mid-Bowline Group Corp and its subsidiary WIND Mobile Corp. for an enterprise value of around CAD 1.6 billion or $1.15 billion. WIND is Canada’s largest non-incumbent wireless provider, serving around 940,000 subscribers. Investors are selling Shaw Communications Inc (USA) (NYSE:SJR) because they think management has overpaid. Amid the acquisition announcement, the analysts at Howard Weil downgraded Shaw shares to ‘Sector Perform’ from ‘Ouperform’. Hedge funds have been ambivalent on Shaw Communications Inc (USA) (NYSE:SJR), as only 15 funds from our database owned 1.7% of the company’s float on September 30.

Disclosure: none