Not all big stock moves are equal.
Some are accompanied by heavy trading volume. Others come with but a whimper of activity.
Which ones are more significant? Often it’s the high volume moves that pack the most punch.
In stock investing, when a crowd forms it typically sticks around for a while. Once a news catalyst generates interest in a company, more investors are buying and selling—which translates to more eyeballs watching the stock.
High volume shifts can also foretell which direction a stock is headed over the longer term. When a mass of bulls forms, it often intends to dig in its heels and not sell shares. This tends to keep upward pressure on share price movement. The reverse is also often true when a bearish crowd amasses.
Last week, several large caps experienced unusually high volume as a result of some major news. Reversals happen all the time, but it’ll be hard to buck the current tide on these three stocks.
Why Did 3M Stock Go Down?
3M Company (NYSE: MMM) shares sank 9.5% Friday in more than 8x their 90-day average volume. The selloff was in response to an Indiana bankruptcy court denying Aearo Technologies’ request for an injunction to the legal action against 3M in relation to Aearo’s Combat Arms earplugs. The 3M subsidiary is the subject of more than 200,000 lawsuits that claim the faulty battlefield earplugs caused hearing loss for U.S. soldiers.
The move was designed to halt the claims on the grounds that Aearo Technologies is insolvent and encourage the accusers to engage in settlement discussions. An unfavorable decision now has 3M on the path to a jury trial that, according to Bloomberg, could force the company to pay over $100 billion in damages.
Although 3M said it plans to appeal the bankruptcy court decision, the market sees little chance of success. More than likely, an extended and potentially expensive litigation lies ahead—which is why so many investors chose to get out. Sometimes corporate legal fortunes can swing on a dime, but it appears 3M could be stuck in a downtrend for the rest of the year.
Will Zoom Stock Recover?
Zoom Video Communications, Inc. (NASDAQ: ZM) gapped down at 6-times average volume in the wake of its Q2 earnings report. The video communications platform provider disappointed the market with 8% revenue growth that was miles away from the type of growth it reported during the early pandemic. It marked the sixth straight quarter of slower top line growth after Zoom posted 369% growth in the fourth quarter of fiscal 2021.
It didn’t help matters that management offered a weak outlook for the current quarter. The company’s projection of roughly $1.1 billion in Q3 revenue implies 5% year-over-year growth and indicates that the growth deceleration streak will continue.
Many shareholders that were holding out hopes for a turnaround decided it was finally time to sign off Zoom. The stock has squandered all of its pandemic gains and failed to attract a herd of bulls since spiking to nearly $600 in October 2020.
Even though businesses large and small are still incorporating online collaboration tools into their daily workflows, Zoom is no longer the go-to solution it briefly was. Microsoft’s Teams and Salesforce’s Slack are formidable challengers in what has turned into a crowded field of alternatives. Zoom is rolling out new products and features to attract customers but faces an uphill battle with fierce competition and cautious corporate spending in the current economic environment.
Why is Trading Volume Up for Occidental Petroleum?
Volume picked up again on Occidental Petroleum Corporation (NYSE: OXY) last week sending the oil and gas producer to a fresh 52-week high. The elevated trading in the stock flowed from Warren Buffet’s ongoing interest in acquiring a bigger stake in Occidental after it dipped back below $60.
The legendary investor’s Berkshire Hathaway conglomerate was granted regulatory approval to buy as much as 50% of the company. He already held an approximately 20% stake in Occidental after aggressively acquiring shares over the last several months. Factoring in warrants Buffet received as part of Occidental’s Anadarko acquisition, he now controls more than one-fourth of the equity.
Receiving permission to almost double his position from here sets the stage for the Oracle of Omaha to eventually buy Occidental outright, something many prognosticators see as inevitable. In the near-term, the company has benefitted from higher energy prices and is clearly considered by Buffet to fit the mold of an attractive long-term value investment.
With the headlines around Buffet and Occidental mounting in 2022, the stock has attracted attention from retail traders that have embraced it as a meme play. Between Berkshire’s relentless pursuit and the newfound social media interest, Occidental seems destined to keep gushing higher.