Monday, May 16, 2011

ARC ‘s stock price went higher, then drifted lower

In a post on my blog on March 25th, 2011, I pointed out that “Equities research analysts at Robert W. Baird & Co. upgraded shares of American Reprographics Company (NYSE: ARC) to an “Outperform” rating in a research note released to investors today.”

On March 25, 2011, ARC’s stock closed at $ 9.98.

Subsequent to that date, ARC’s stock drifted higher, and, on April 1, 2011, ARC’s stock closed at $10.37.

Subsequent to that, ARC’s stock has gone up and down, and, today, May 16, 2011, ARC’s stock closed at $8.56.

I guess RW Baird’s outperform rating hasn’t yet had much of an upside effect on the price of ARC’s stock. Maybe that’ll happen at some point. As that saying goes, “we’ll see.”

ARC’s largest institutional shareholder (other than T Rowe Price) is “Stadium Capital Management.” I don’t knowhow much SCM’s “average cost per share” was for the ARC shares it owns, but, oh my, these guys have placed a big bet on ARC stock. I would imagine that the guys at SCM know the reprographics (and technology) business “inside and out” (i.e., a lot better than most do), for they’ve placed a big bet on their investment in ARC shares. I hope their bet pays off for them. They are probably long-term bettors.

SCM owns 4,627,245 shares of ARC stock. (at least that was the number reported as of December 31, 2010, per

At the close of the market on March 25, 2011, SCM’s ARC shares were worth approximately $46.2 million.

At the close of the market on April 1, SCM’s ARC shares were worth $48.0 million.

And, at the close of the market today, May 16, 2011, SCM’s ARC shares were worth $39.6 million.

A quick check on and on reveals that analysts are estimating that ARC’s EPS for 2012 will be in the range of $.28 - $.32 per share.

And, a quick check on BusinessWeek (owned by Bloomberg) reveals that analysts are estimating that ARC’s revenues will rise to $467 million for C/Y 2012.

If both of those estimates turn out to be close to reality, then, hopefully, SCM’s big bet will pay off handsomely.

Wow, the market was quite funky today; up, down, up, down.

Found an interesting “note” on the Internet today by Nicholas Santiago. He titled his “note”, “Schizophrenic Market”. Here’s what he said…..

If you are an intra-day stock trader you will have noticed that the major stock market indexes have traded all over the map. The Dow Jones Industrial Average has traded over 300 points from its intra-day peaks and troughs. The driving force behind every stock market move is the U.S. Dollar Index(DXY). When the DXY declines the major stock indexes rally and trade higher. The opposite is true when the DXY trades higher the major stock indexes deflate and trade lower. This inverse relationship between the stock market and the U.S. Dollar Index is as tightly correlated as I have ever seen.

Options expiration is on May 20, 2011, therefore, that means that the entire trading week should be very volatile. Often during this week, many of the leading and popular stocks will trade rather erratic. The reason for this type of activity is due to the institutional games that will played by the major financial firms. You see the institutions have enough capital on hand to push the market anyway they see fit. The object by the institutions is to try and shake out the small retail options traders out of their positions. For example, if enough retail options traders bought call options on a stock like Netflix Inc.(NASDAQ:NFLX), or Apple Inc.(NASDAQ:AAPL), the stocks will generally sell off during the week so that the retail options trader closes his call position for a loss on the premiums paid.

These games take place every month during the week into options expiration. Therefore, until the institutions take care of business it would be prudent to expect more volatility throughout the trading week.

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