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3 Stocks That Weren't Crushed Thursday

Posted: Nov 21, 2008 11:40 AM by James Brumley

Tickers in this Article: GE, GM, STZ, IPG, JNS

With the market hitting a new multi-year low on Thursday - thanks to what has become a fairly routine 5% selloff - one would think every large cap stock in the world would be following the lead of, say General Electric's (NYSE:GE) 11% tumble. One would be wrong though. There were actually a handful of significant stocks able to resist the slaughter and make big gains.

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The question is, was their rally an omen or an accident? If you answer that question, you may end up finding a couple of ownership-worthy names.

Janus Capital Group
A 10% run-up for a stock on a bit of good news would be understandable, even if unlikely in this environment. In a bear market though, seeing Janus Capital Group (NYSE:JNS) do it for no known reason raises an obvious question, why? It's not as if this mutual fund company has been immune to the monster-sized selloff and the wave of fund redemptions that come with it. Its customers took $5.1 billion away from the fund last quarter, or about 3.2% of the total amount of money under management, which was $160.5 million as of September 30.

The more likely answer to the question is speculation about being taken over. Janus was bandied about as a potential acquisition candidate in late October. Nothing has come of it since then, but considering the stock jumped 10% on Thursday on higher than average volume, perhaps there's something to the idea.

Given that the company is cash-heavy ($297 million in cash, and a market cap of only $917 million), the possibility of a buyout may well be a strong one.

Interpublic Group of Companies
Although part of the S&P 500, Interpublic Group of Companies (NYSE:IPG) still isn't exactly a household name. You've probably seen the company's work though; it's a giant ad agency that did more than $7 billion worth of business over the last twelve months. On Friday, November 21, it was awarded a media account worth $400 million from MillerCoors.

Oh, and Interpublic Group also happens to be General Motors' (NYSE:GM) ad agency. That's not exactly the kind of client that creates a warm-and-fuzzy feeling. A GM spokesperson specifically said all contracts were to undergo a review when it was time for renewal, which could clearly be a problem for the agency. Yet, Interpublic shares still surged 18.4% on volume that was almost double the average over the last three months.

Omen, or accident? I say it's an accident. Steer clear of IPG. GM is not likely to be the only company putting ad agency contracts under review in this environment.

Constellation Brands
Constellation Brands' (NYSE:STZ) 1.1% pop wasn't the third-biggest winner on Thursday, but it was the third most compelling. The stock has been trending higher for a week now, while the overall market has been doing anything but. Constellation Brands was up 4% over the five trading days ending Thursday, compared to the S&P 500 which was down 19%.

There are a couple of interesting points about Constellation Brands. The company's not profitable, and hasn't been (consistently, anyway) for a while. Yet, UBS saw fit to recently upgrade the stock to a 'buy' rating from 'neutral'.

So was UBS lucky, or smart? I'll go out on a limb here and agree with the UBS analyst. Constellation Brands knows what's working, and what's not working. Its their beer lines are a liability, and its lower-priced wines are falling into favor. And, Constellation knows how to correct its issues. Some restructuring last year and new incentives this year should help lead them to next year's estimated earnings of $1.84 per share. (Learn more about a company's expectations in Earnings Forecasts: A Primer.)

Frankly, getting there may be easier than most investors realize. The losses aren't operating losses - they're one time charges that won't show up in upcoming quarters now that the bulk of the restructuring expenses have been booked. A closer look reveals that Constellation has met or beat Wall Street's operating earnings estimates over the last four quarters.

Bottom Line
There's still no guarantee of anything in this market environment. But in terms of a stock's rally with a legitimate promise of longevity, 2-out-of-3 isn't bad.

To protect your portfolio, read Adapt To A Bear Market.

By James Brumley

James Brumley is a freelance writer and registered investment advisor. He began his career as a broker with a major Wall Street firm, where fundamentals and long-term holding periods were core strategies. After that, he switched gears completely, becoming an analyst at a short-term trading newsletter that focused on technical analysis. He now manages client money using the best of both philosophies. His company, Bluegrass Portfolio Management, offers investors an opportunity to reap superior returns with minimized risk.

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