The Standard & Poor’s 500 index is only up about 0.5% so far today, but a few stocks on the index are seeing big, double-digit gains.
Shares of DR Horton (DHI), Valero (VLO) and J.C. Penney (JCP) are all up about 10% at the latest, with Hess (HES) stock rising 9%.
DR Horton and Valero seem to be climbing on the back of positive earnings, with the former boosted by posting its strongest first quarter in six years�just as we’re seeing more data pointing to a recovery in the housing market:
An estimated 367,000 new homes were sold in 2012, up 20% from 2011, according to the Commerce Department…The market for existing homes, which makes up the bulk of the nation’s residential market, also is healing. On Monday, the National Association of Realtors trade group reported that pending home sales, which reflect contracts to purchase homes, climbed 6.9% in December from the same month in 2011 and have risen for 20 consecutive months compared with a year earlier.
Refiner Valero also reported good earnings, as well as gross margins that were far higher than analysts had expected.
Meanwhile, Penney’s move may be delayed reaction to yesterday’s news that the company is (partially, at least) re-embracing the sales and discount strategy that it seemed to have abandoned last year and for which the retailer is best known (and most liked).
As for Hess, that stock’s move is likely a result of a letter sent by Elliott Associates — which owns 4% of Hess — to the company’s shareholders:
After extensive study and analysis, we are convinced that tremendous value is trapped inside the Company as a result of poor oversight by a board of directors lacking both the experience and independence to set a clear, shareholder-focused, value-creating strategy…
We believe that unlocking this trapped value could result in a share price of greater than $126 per share(2) , amounting to upside of over 150%(3) , or $26 billion of enterprise value creation.
Our investment in Hess Corporation is Elliott’s largest initial equity investment in its more than 35 year history. The size of the position reflects our conviction that, with proper oversight and guidance from the Shareholder Nominees, tremendous value can be unlocked.
You can read the letter for the full details, but here’s DealJournal’s David Benoit with the short version:
Among the suggestions Elliott has are to spin-off the lucrative acreage Hess has in the Bakken Shale of North Dakota, which Elliott says it believes is among the best locations in the Bakken, a hot bed of activity in the oil and gas world.
Elliott also says Hess should follow other integrated energy giants that have recently split up their so-called upstream, that is the actual work of getting resources out of the earth, and downstream, that is selling the finished products to consumers. Hess operates a vast network of gas stations along with its global explorations operations, and Elliott says Hess should sell it.
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