From Briefing.com
Tyco International (TYC) 28 1/4: This is worse than puppy love. When Wall Street falls in love with a stock, it just can't say no, it's over. Following yesterday's 22.1% drop in the price of this diversified medical supplies, electronic security and electrical components company, Wall Street is out in force backing the stock again. Yesterday's price plummet was caused by the SEC launching a "non-public, informal inquiry" into the Tyco's acquisition accounting practices, Wall Street has been backing the stock since the questions about TYC's aggressive accounting practices were first raised in early October. Back then, the stock was trading at around 51 1/2 (adjusted for a subsequent 2-for-1 stock split) when the accounting questions were raised by money manager David Tice of the Prudent Bear fund and publisher of Behind the Numbers. Since then, Wall Street has circled the wagons and backed the stock with Merrill Lynch even naming the issue its "Focus One" stock of the week shortly after the questions emerged to show support for the stock. However, this is one issue in which Wall Street's influence has had little impact in preventing the stock from sinking. Shares of Tyco have been cut almost in half in the two months that have followed the accounting allegations. But like a dog with a bone, Wall Street can't let go with various firms reiterating their "buy" ratings on the stock this morning and even Lehman Brothers touting their $80 price target. But the chart tells the story that despite what Wall Street says, investors like mice leaping from a sinking ship, will sell the stock first and ask questions later. So far, not many investors are convinced that an inquiry into Tyco's aggressive accounting practices should be taken lightly, especially when Wall Street shows so much unconditional love for this issue. - RN |
