Big moves up and down in share prices need to be supported by increasing volume or the move will rarely be sustainable. One way to determine strong trends and get on board long upward or downward moves is to look at stocks that are trading a large amount of volume early on in the day, when compared with their average volume. This will help us set the best moves apart from the rest. (For background reading, see Volume Rate Of Change.)
Here are five stocks that were trading on very large volume by noon today. Let's take a closer look at one that has seen a large share price change as well.
||% of Average Volume
|Hilb Rogal & Hobbs(NYSE:HRH)
| * Data as of 9:56 am EST October 2, 2008
Capitalizing on Fear
General Electric can be thought of as the picture of diversification
. If we consider GE to be a work of art for a moment then the world has recently witnessed one of its greatest collectors adding to their collection of masterpieces. On Monday, GE announced a deal to sell $3 billion in preferred shares
to billionaire investor Warren Buffett's
firm Berkshire Hathaway
). The GE sale is part of a larger plan that includes selling $12 billion in common stock to investors at $22.25. The common stock offering and the Buffett announcement were the two catalysts behind GE's unusual spike in volume.
The Oracle of Omaha is wasting little time taking advantage of the fear in the market with Berkshire Hathaway's $3 billion investment in GE preferred shares. The preferred shares will pay an annual dividend
of 10% and are callable after three years at a 10% premium. With one investment, Berkshire Hathaway increases its exposure to GE's broad array of industries including infrastructure
, commercial finance, healthcare, consumer finance by way of GE Money and entertainment by way of NBC Universal. Berkshire Hathaway also gets exposure to a global company that is already generating more than 50% of its revenue outside of the U.S.
First Half of 2008
For the first six months ending June 30, GE's total revenue
increased 9% over the prior year to $89.2 billion. Infrastructure revenue of $32.5 billion led the way representing a 24% increase over the same period a year ago. Part of the revenue increase was due to a combination of GE's acquisitions
of Aviation companies, increased sales of equipment and chemicals used to treat water, increased sales of transportation equipment and a weaker U.S. dollar. Examples of GE Infrastructure offerings include everything from environmentally friendly wind turbines and solar panels to oil & gas exploration equipment. GE stock is down 33.35% since the beginning of the year while the SPDRS S&P 500 ETF
) is down 19.83% in comparison.
Not the first big investment in GE
Earlier in the year GE entered into an agreement with an Abu Dhabi government investment company, Mubadala Development Co., for a $4 billion capital investment in its commercial finance business. The Mubadala deal is intended expand upon lending opportunities in the Middle East and Africa. Likewise the infusion from Buffett and common stockholders is meant to enhance liquidity and allow GE to assume an aggressive posture during the current economic downturn.
Instructions on Building a Portfolio
GE marks Buffett's third investment in recent weeks behind his $5 billion investment in Goldman Sachs
) and his $4.7 billion acquisition of Baltimore, MD based Constellation Energy
). Investor's should note that in classic Buffett fashion the companies he's acquiring or investing in make products and offer services he feels comfortable with.
The liquidity crunch that sent Wall Street firms into a downward spiral is also creating opportunity for investors with a vision for the future. The volatility in the stock is likely to continue since institutional and individual investors alike find it hard to not follow the investment decisions of one of the world's greatest investors.