The MoPR Blog

Five months ago we introduced the MoPR 500, an “index” of mobility industry stocks. We selected companies across a broad swath of the mobility industry, and “buying” one share of each, we assembled a list of stocks we could purchase for $500; hence the MoPR 500. We were inspired to create this index by forecasts of the stock market’s impending doom. Certainly a lot of what was forecasted as played out. But five months later, how are our mobility stocks doing?

We began at the close of market October 3, 2008 with an index value of $500.49. At Friday’s market close (March 6, 2009) the MoPR 500 was valued at $358.82, a loss of 28.31 percent.

For some context, at the close of the market on October 3, the Dow Jones Industrial Average (DJIA) was valued at $10,325.38. On March 6 the DJIA was valued at $6,626.94, or a loss of 35.82 percent. As we watched the ups and mostly downs of the market these past five months, we observed that our mobility index usually though modestly outperformed the DJIA.

Of our 27 mobility stocks, 26 went down in value. Standing alone was Broadcom (NASDAQ: BCRM). On October 3, a share of Broadcom was worth $16.63, and last Friday it closed at $16.97. Only a 2.04 percent gain, but in this volatile market, who wouldn’t take that? For the most part, Broadcom has traded consistently over $16 per share over the past five months. Perhaps part of the stock’s appeal is that Broadcom recently introduced multimedia chipset technology for mobile phones.

The next four best performing stocks in the top of the of MoPR 500 are:

• Sybase (NYSE: SY), purchased for $28.76 and trading last at $26.48 for a loss of 7.93 percent.
• Syniverse (NYSE: SVR), purchased for $16.11 and trading last at $14.14 for a loss of 12.23 percent.
• Verizon (NYSE: VZ), purchased for $31.24 and trading last at $27.28 for a loss of 12.68 percent.
• Neustar (NYSE: NSR), purchased for $18.83 and trading last at $15.63 for a loss of 16.99 percent.

It’s sad when three of the best five performers have double digit losses, but these losses are about half the average loss for the index and about a third of the loss of the DJIA.

Four of the five worst performing stocks comprising the bottom of the MoPR 500 cost about $3.00 per share. At such a low initial value, every cent lost makes the stock drop more percentage-wise. The sole exception was Clearwire, purchased for $9.92 per share. Clearwire is in the midst of a much-watched consumer WiMax service roll out.

The five worst performing stocks of the MoPR 500 are:

• Powerwave (NASDAQ: PWAV), purchased for $3.32 and trading last at $0.25 for a loss of 92.50 percent.
• Nortel Networks (NYSE: NT), purchased for $2.08 and trading last at $0.32 for a loss of 84.62 percent.
• UTStarcom (NASDAQ: UTSI), purchased for $2.88 and trading last at $0.70 for a loss of 75.69 percent.
• Clearwire (NASDAQ: CLWR), purchased for $9.92 and trading last at $2.82 for a loss of 71.57 percent.
• Alcatel Lucent (NYSE: ALU), purchased for $3.54 and trading last at $1.16 for a loss of 67.23 percent.

More information about the individual holdings can be found on our Stockalicious and Herdstreet portfolio pages, as well as our MoPR 500 Index page.

These last few weeks have certainly been crazy on the stock market. The only stock that seemed to do well the last two weeks was Campbell Soup (NYSE: CPB). It made us wonder how mobility stocks would fare as compared to the rest of the market. So we’re trying an experiment.

We looked at some representative companies across the wide mobility spectrum — from wireless to Wi-Fi, from mobile entertainment to network infrastructure — and we put together a portfolio buying a single shares of as many of these mobility stocks as we could purchase for $500. So yes, the “500″ in the name means dollars, not the number of stocks in our index.

On October 3, 2008 the “MoPR 500 Stock Index” was valued at $500.49. How’s it doing today? See how our mobility stock index is performing by visiting the MoPR 500 Index page here on TheMoPRBlog. You can get detailed information about all the stocks her at our MoPR 500 index pages on Herdstreet and Stockalicious.

At the beginning of August I wrote a post about the then-pending changes to the guidelines from the Securities and Exchange Commission (SEC) regarding the notorious Reg-FD – the set of SEC rules guiding fair disclosure of material information to the public. Six weeks later, all hell has broken loose on the stock market (for myriad reasons), and in the news today comes word that even John McCain would fire Chris Cox, the SEC chairman who until now was being credited for bringing the commission into the 21st Century.

But I want to go back to something I said in my August 1 post:

“Instead of waiting for the SEC to catch up to technology advances, social media and blogging companies may want to drive technology advances to catch up with the appropriate need for fair disclosure.”

At issue in this post was whether the SEC was going to allow publicly traded companies to issue material information via company websites and blogs. The SEC position was that at the time Reg-FD was written there were no such phenomena as social networks and blogs, and therefore regulation needed to catch up with technology.

Although a huge fan of social media and true believer in the ability to use them for dispensing news and opinions, I wanted to sound a note of caution. Unlike the wire services that likewise urged the SEC to reconsider whether material information may be distributed via blogs, Mobility PR won’t face an economic impact from the rule changes. My position comes from working in corporate communications at public companies and understanding the need for simultaneous and widespread disclosure of information that impacts stock price.

My concern in August was that while social media is the communications platform about which everyone is buzzing, it’s still very much nascent and in many instances as yet unproven. The purpose for disclosing material non-public information – that is information known only inside a company that once made public will cause a change in the stock price – is so that all investors have access to important information at the same time. Without a simultaneous and widespread release of information, some investors will have an advantage over others. The best method for simultaneous release of information, still today, is the traditional newswire service. Using the blogosphere for such a release assumes that everyone investing has caught up with technology – and perhaps more important, that technology has caught up to the purpose of this regulation.

Reg-FD is designed to protect investors. I think the past two weeks have demonstrated that investors do need protecting. Not from the violent mood swings of the stock market this week (that’s called “inherent risk”), but from incidents like the one that happened last week. The SEC commissioners should pay very close attention to what happened when a “glitch” led to a massive sell-off of United Airlines stock, resulting in a price drop so fast and so large that it forced NASDAQ to stop trading on the stock.

Here’s what I’ve discerned from the reports on the events of last week. On September 8, 2008, a Chicago Tribune online news article from December 10, 2002 about United Airlines’ then-plan to seek bankruptcy protection was inadvertently recirculated by Income Securities Advisors to a Bloomberg stock market website. Investors believed the article to be current news (because all news on these sites is supposed to be current), and the sell-off began. Before NASDAQ halted trading of United, shares had fallen from about $12 to $3.

When a mistake like this is made, everyone wants to blame someone, particularly the parties involved who want the blame to rest with someone else. So the Tribune Company, which owns the Chicago Tribune, laid blame at the feet of Google. A company press release issued two days after the event begins:

“Tribune Company today said the confusion surrounding a 2002 Chicago Tribune article on the Internet this past weekend started with the inability of Google’s automated search agent “Googlebot” to differentiate between breaking news and frequently viewed stories on the websites of its newspapers.”

Google of course disagrees and thinks the fault lies elsewhere. A Computerworld blog post by Preston Gralla I think best encapsulates the true essence of the problem, and why the SEC needs to pay close attention. Preston writes:

“So who’s at fault here? The Tribune Company, Google, and every other Web site that uses automation rather than human intelligence for determining what is news. The old story showed up as a top link in the South Florida Sun Sentinel because the story was clicked on once during a late hour when there was little traffic to the site. That made it a “top story,” and so it was automatically put near the top of the page. The Google bot saw it, and assumed it was a new story. Things spiraled out of control from there.”

That the fault ultimately lies with the automated mechanisms involved in collecting and distributing news – in this case specifically to investor news websites – should prove to everyone that the online/social media apparatus are not yet mature enough to satisfy the intent of Reg-FD.

What is exposed in this instance is not vulnerability of social media, but an opportunity for social media companies to build a better newstrap. When protecting the public trust, it’s not always a question of regulation catching up to technology. In the instance of using social media to communicate material information to investors, the question must be whether technology can catch up to regulation.

We invite your comments.