Real estate brokerage, technology and mortgage stocks lost value on Wall Street in May as did the broader market indices that indicate overall investor sentiment. Eight of the 10 corporations that make up the hypothetical Inman Index were in the minus column at month-end.
The largest losers on a percentage-of-stock-price basis were Interactive Corp. and Cendant Corp., both of which are large complicated entities that own real estate and other interests.
Interactive’s shares opened the month at $29 and closed the month at $25.83, a loss of $3.17, or nearly 11 percent, per share. The company, which owns and operates the LendingTree.com and RealEstate.com Web sites, among other Internet properties, reported an increase in revenue, but a decline in income for the first quarter of 2006 on a quarterly comparative basis. Revenue climbed 36 percent from $1.14 billion in the first quarter of 2005 to $1.55 billion in the first quarter of 2006. Net income sank 32 percent from $69 million, or 19 cents per share, in last year’s first quarter to $47.2 million, or 14 cents per share, in this year’s first quarter.
A Motley Fool contributor speculated that “the eclectic nature of IAC’s portfolio” might dissuade investors from the company’s shares. He also opined that “all of the IAC puzzle pieces fit together a lot better than some (investors) may think” they do.
Meanwhile, shares of Cendant opened the month at $17.48 and closed the month at $16.17, a loss of $1.31, or 7.5 percent, per share. Cendant, which owns real estate franchise chains and brokerages as well as other real estate and travel companies, previously announced a breakup into four smaller entities, a move that appears to have puzzled analysts. The company recently lowered its 2006 earnings estimate for its real estate group, which is expected to spin off this month into Realogy Corp.
Mortgage stocks were modestly out of favor on Wall Street in May, when they gave back some of April’s gains. Investors’ dismay is likely due to the Federal Reserve’s hikes in bank interest rates, which increase financial institutions’ costs of borrowing on a short-term basis. Uncertainty about the Fed’s direction creates a difficult climate for banking and financial companies.
Countrywide Financial Corp.’s shares fell from $40.26 to $38.28, a drop of $1.98, or 4.9 percent, in May. Reuters reported mid-month that Countrywide’s shares were hurt by “mounting fears that industry-wide increases in (mortgage) delinquencies would lead to more defaults” and that investors were “growing particularly uneasy with the ‘pay option’ mortgages that make up nearly half of the loans in Countrywide’s loan portfolio.”
Shares of IndyMac Bancorp lost $2.45, a decline of 5.1 percent from $48.35 to $45.90 per share. The media-shy company opened a regional loan center in Tampa that is expected to employ 140 workers.
Washington Mutual bucked the trend in May as its shares achieved a 2.2 percent price gain, likely due to aggressive personnel restructurings. WaMu has announced cutbacks in U.S. jobs and expansion of its overseas operations. Some 1,700 jobs are scheduled to be eliminated this year in Seattle, Jacksonville, Fla., and South Carolina.
Fannie Mae was the subject of more sound and fury in the press after government regulators hit the company with a $400 million fine for its faulty accounting practices, yet Wall Street now seems accustomed to bad news about the beleaguered and severely troubled corporation. Shares of Fannie Mae were off $1.10, or 2.2 percent, having opened at $50.85 and closed at $49.75 last month.
The hypothetical Inman Index of publicly traded real estate and mortgage corporations posted a one-month loss of 3.4 percent in May. The Dow Jones Industrials, Standard and Poor’s 500 and Nasdaq Composite indices lost 1.8 percent, 3.1 percent and 6.5 percent, respectively.
Marcie Geffner is a real estate reporter in Los Angeles.