Some Net Stocks Rocket Amid Bargain Hunting, ‘Short Sale’ Rush
Stocks can have extraordinary rallies even in the context of deep bear markets, some traders rediscovered on Thursday.
A number of Internet-related stocks that have plummeted this year posted sharp gains on Thursday, in some cases lifting prices more than 20% for the day.
But some analysts said the outlook remains grim for many or most of the stocks once the calendar turns to 2001.
Among the gainers were software makers Kana Communications and Portal Software. Kana (ticker symbol: KANA) surged $2.83, or 32%, to $11.77, while Portal (PRSF) jumped $1.38, or 23%, to $7.44.
“There’s no real news” to account for those gains, said Paul Meeks, who manages about $4.5 billion in technology stocks for Merrill Lynch Investment Managers.
The moves may have stemmed from general bargain-hunting--or simply from “short sellers” rushing to buy the stocks to close out their bets that the prices would fall further.
In short sale a trader borrows stock and sells it, expecting to buy it back later at a cheaper price. When that buying occurs it can help drive a rally in the shares.
“We are hearing that hedge funds are nervous with their technology shorts,” said Tim Ghriskey, a senior portfolio manager with Dreyfus Corp. who manages about $4 billion in equities.
Outstanding short sales of Nasdaq and New York Stock Exchange-listed stocks were at record highs as of mid-December.
Some short-sellers may not want to keep their positions open over the long holiday weekend, preferring instead to cover their bets, then short the stocks again next week if the market begins to slump anew.
Many analysts worry that January could be a rough month for technology stocks as companies report earnings for the fourth quarter. A string of big software and computer makers including Microsoft Corp. and Hewlett-Packard Co. have already said they expect fourth-quarter results to fall short of estimates, citing forecasts for a global economic slowdown.
“We do not think the worst is over. We think there is still another leg down” in tech, Ghriskey said.
Many companies with results that don’t meet forecasts disclose the shortfalls in the first weeks of the new quarter after accountants have had a chance to calculate the period’s figures. That could bring a barrage of bad news next week and the week after.
And once companies start releasing actual results, there’s potential for more disturbing news as they comment on the outlook for 2001, analysts warn.
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One-Day Net Wonders?
A number of beaten-down Internet-related stocks rocketed on Thursday, though their gains recouped only a sliver of their losses this year from their peak prices.
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Ticker 52-week Thurs. close. Pctg. Stock symbol high and change chng. McAfee.com MCAF $58.50 $6.00, +$3.38 +129% EPlus PLUS 74.63 12.13, +4.38 +56% Webvan WBVN 18.50 0.50, +0.16 +46% Digital Lava DGLV 5.38 2.75, +0.75 +38% EarthWeb EWBX 55.31 7.69, +1.94 +34% Kana Comm. KANA 175.50 11.77, +2.83 +32% Genuity GENU 11.25 4.75, +0.88 +23% FreeMarkets FMKT 370.00 21.44, +3.63 +20% Verticalnet VERT 148.38 6.63, +0.97 +17% Blue Martini BLUE 77.63 15.50, +2.19 +16% EBay EBAY 127.50 37.81, +2.56 +7%
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Source: Reuters
