Put down the 10-K filings and the stock screeners. It's time to take a break from the traditional methods of generating investment ideas. Instead, let the crowd do it for you.
From hedge funds to individual investors, scores of market participants are turning to social media to figure out which stocks are worth watching. It's a concept that's known as "crowdsourcing," and it uses the masses to identify emerging trends in the market.
Crowdsourcing has long been a popular tool for the advertising industry, but it also makes a lot of sense as an investment tool. After all, the market is completely driven by the supply and demand, so it can be valuable to see what names are trending among the crowd.
While some fund managers are already trying to leverage social media resources like Twitter to find algorithmic trading opportunities, for most investors, crowdsourcing works best as a starting point for investors who want a starting point in their analysis.
Today, we'll leverage the power of the crowd to take a look at some of the most active stocks on the market.
- Nearest Resistance: $40.50
- Nearest Support: $37
- Catalyst: Acquisition
Printer and scanner manufacturer Lexmark International (LXK) is popping on big volume this afternoon, up more than 10% following news that the firm is being acquired by a group led by Apex Technology and PAG Asia Capital in an all-cash deal. The Lexmark acquisition will pay shareholders $40.50 per share, which works out to approximately a 30% premium to the firm's closing price when it first announced it was exploring selling itself.
Most of the money has already been made on Lexmark at this point. That said, for investors willing to stomach some headline risk, there's still about a 6% premium priced into shares at current levels.
- Nearest Resistance: $38
- Nearest Support: $26
- Catalyst: Q1 Earnings
Shares of troubled tech company Yahoo! (YHOO) are up 3% on big volume this afternoon, following yesterday's first-quarter earnings call. Yahoo! posted a profit of 8 cents per share after one-time items, an earnings number that more or less fell in-line with estimates. That makes this the first quarter in the last year and a half that Yahoo! has seen a positive price reaction to earnings. Still, earnings are secondary to Yahoo!'s progress at selling itself, and CEO Marissa Mayer did a good job of convincing investors that management is working hard to get the company sold.
Technically speaking, Yahoo! is still pretty volatile in the long term. Shares have been forming a broadening pattern since last fall, indicating that there's still more risk baked into shares than the recent rebound conveys. A lot of that risk is headline risk tied to a potential sale. For that reason, it's a stock best avoided by anyone with a low risk tolerance.
TheStreet's Jim Cramer said recently that Yahoo! is "worth more than it's selling for."
"The company is worth something. I put it like that because if you back out all the different parts, it's almost like people think it's worth nothing," he said. "That's wrong. There is some value being created."
- Nearest Resistance: $7.75
- Nearest Support: $5.75
- Catalyst: Merger Anxiety
Office Depot(ODP) - Get Report is correcting this afternoon, down more than 5% on merger concerns, following analysis suggesting that the FTC is likely to prevail in the preliminary injunction to block Office Depot's pending merger deal with Staples (SPLS) . A comment about the different business environment from the judge presiding over the case has investors worrying that the deal won't get done -- and that's widening the merger premium on this deal to 48.5%.
Ultimately, the Office Depot trade boils down to headline risk. If the court throws out the FTC's injunction, then Office Depot stands to rally significantly as the deal comes to a close. But it's anyone's guess how that ruling will go at this point, and uneasy investors are driving the selling volume today.
Disclosure: This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.