Don't just stand there, do something.
That's the motto of the companies that want their stocks to go higher. It plays out every day. Today is no different.
Almost every single company with a stock that jumped today played a big role in that jump and very few of those rallies were earnings-based. They are companies that aren't about to be constrained by possible Fed rate hikes, the strong dollar -- even as it is definitely weakening -- or port strikes or politics. All of the dark macro forces that keep stocks down can be defeated by an aggressive management determined to take control of its own destiny.
These managements aren't willing to cede their stocks' futures to the S&P 500 futures. They aren't lamenting the miserably weak retail sales numbers we got this morning. You don't need to know where the German 10-year Treasury went out this morning if you take a value creation path. You aren't thinking, "Gee, there are a ton of people talking about how the Fed has to move right now or else." All these managers are thinking is, "If we take this action, we could create instant wealth for our shareholders and that's exactly what we are supposed to do."
Let's run them down. First, there's Pall Corp. (PLL), the company that makes filters for a host of industries including aerospace, biotech and the water businesses, that agreed to be acquired today by industrial conglomerate Danaher (DHR) for a huge price, $127.20 a share. This stock was at $99 on Monday! Holy cow. What a win. You won't get that kind of return in your bond fund. That's for certain.
But was it an overpay? Apparently both ThermoFisher (TMO), a biotech tools company owned by my charitable trust, and Danaher wanted it so you could expect that there was a reach involved. I know we did the math on what would have happened if Thermo had paid the price Danaher did, and the answer is that it would have cost too much. Which is why I believe Thermo's up despite the loss of Pall Corp.
However, Danaher's stock initially roared on the news, and while it ultimately gave up a lot of that gain, the market applauded. Danaher recognized that it can borrow money cheaply -- it's paying all cash for Pall -- and it could be accretive even for Danaher at these prices.
Plus, Danaher didn't just bolt Pall onto its existing enterprise. The company decided this morning to split itself into two entities, an industrial company with a specialty in test and measurement and a science-and-technology company with Pall as its keystone. The move's brilliant because Danaher had been a hard-to-understand conglomerate. With Pall in the stable, it made no sense to keep them under one roof. Immediately I expect both companies to make acquisitions to grow their own businesses. And when those acquisitions happen, the stocks of these two companies will go higher, too.
Then there's Williams (WMB), a terrific company responsible for transporting 30% of our natural gas around the country. Today it bought in the 40% of Williams Partners (WPZ), a subsidiary that's a master limited partnership, for $13.8 billion in stock. Obviously the target rallied big, up 20%, but again the acquirer's stock is zooming, too, up almost 5%. It makes sense because Williams, like Kinder Morgan (KMI), which also bought in its limited partnership last year, can now get access to inexpensive capital that it might not otherwise, to continue to buy up other pipelines and raise its distribution 10% to 15% for years to come.
This combination is so exciting in that the new company will have the perfect elixir of income and growth, both hard to come by. It can be the consolidator that is so badly needed in this industry. We have dozens of pipeline companies in this country right now. We need about four or five of them. That's coming.
Or how about Owens Illinois (OI)? Here's one that's not talked about much at all. It's a glass jar company in a cutthroat industry with very low profit margins. Owens Illinois this morning paid Vitro SAB (VITOF), a Mexican company, $2.15 billion to move into the Mexican glass market. The market loved the move and has sent up Owens Illinois more than two bucks. It's instant growth and done in a region where recycling's more of a religion than in our country.
Another winner? Monsanto (MON), the seed biotech company. This agricultural powerhouse is making a move on competitor Syngenta (SYT) and this stock's rallying two bucks just on rumors that it might actually sweeten its bid to entice Syngenta to the table.
That's right, the idea that Monsanto might raise how much it might pay for a competitor has this stock running. That's because Monsanto will be using cheap money and will be taking out a company that it competes for business.
The airline stocks have been part of an overall downturn in the key transport group. They've been acting terribly ever since oil bottomed in the $40s. Management of one of the airlines, Delta (DAL), decided that enough is enough and this morning announced a $5 billion buyback and a 50% increase in the dividend. That's taking matters into your own hands for certain and it is a reminder that even if you think the companies don't have that much earnings momentum right now, they have a ton of earnings.
Now let's talk about the flipside. DuPont (DD) shares are plummeting today precisely because Trian, a hard-charging activist fund led by Nelson Peltz, failed in a fight to get representation on the board of the chemical giant.
While Peltz pledges long-term commitment to DuPont, short-term investors voted with their feet, fleeing the stock for fear that nothing now will change at the company and that Peltz might dump his stock.
I have no idea what Nelson will do. The stock had spiked to $80 when Peltz seemed to have the company on the run. But with his defeat by CEO Ellen Kullman and her board, the stock's fallen to under $70.
Is that fair? Not for us to decide. Peltz put up a good fight but I think in the end Kullman had done a good enough job at DuPont -- we featured the stock last week as one of the best performers in the Dow since she took the CEO gig -- to be able to sway the voters. Plus, she has taken costs out, boosted the dividend and is spinning off her volatile and often underperforming commodity chemical business. What's not to like?
Nevertheless, here's the problem with DuPont's stock. With Peltz not able to effect change, the company becomes just another chemical stock, subject to the slings and arrows of the world's economies. So if the dollar's strong, DuPont could get hurt. If there's a downturn in construction, there could be pain. If the agricultural market gets hammered even more than it has so far this year, then the company will miss the estimates and most likely go lower. No one seems to want the stock of a company that simply puts up with the world's vicissitudes.
Now that's not exactly fair to Kullman, given all she has already done. Nevertheless, it isn't like the stock rallied on the news that Peltz lost the proxy vote.
Now, I think the world's economies are getting better and soon many of the winners today will have earnings tailwinds from both geography and currency. But they don't want to wait. They know they can get something going now, and if the rest of the world improves, that's even better. My advice to the CEOs who are watching: It's no sin to think big to try to bring out value, not by standing there, but by doing something. All I can ask is, what are you waiting for?