From a stock market perspective, Tuesday was an interesting day. Recently I have commented on three stocks—Blue Nile Inc. (NILE), Zale Corporation (ZLC), Pan American Silver Corporation (PAAS)—and I will now provide a quick update.
Pair Trade: Short Zale, Long Blue Nile
Both Zale and Blue Nile were down on the day. Zale was down $0.98 to $26.21 for a loss of 3.60% while Blue Nile was down $0.58 to $38.71 for a loss of 1.48%. Thus, I made money on that pair trade today. Zale has not been acting very well after its recent earnings conference call. I am somewhat surprised that Zale performed as well as it did today, falling just slightly more than the S&P 500 index at a loss of 3.47%. For Blue Nile, what I found interesting is that, although the stock is heavily shorted, it barely moved for most of day and only during the latter portion of the day did it actually fall. Indeed, Blue Nile stock was up slightly for most of the morning. The bears in Blue Nile were given a tepid guidance by the company and today they were given a horrendous market. Yet, the stock has held reasonably firm. Overall, I feel comfortable with this pair trade.
Long: Pan American Silver
Pan American Silver was down $2.48 to $29.22 for a loss of 7.82%. That is a whopper of a loss, especially considering that, according to Kitco, silver was only down $0.16 to $14.49 bid $14.59 ask for a loss of 1.09%. The stock price of Pan American Silver fell seven times more than the actual price of silver did. I find that interesting. I suspect that the simple logic is that China is slowing, do not need as much silver as before, sell silver mining companies. That still does not fully explain why Pan American Silver fell more than silver did itself, but rather it provides a simple explanation of panic that might have set in. As I write this article, I note that, according to Kitco, silver is down $0.20 to $14.20 bid $14.30 ask for a loss of 2.00%. I am curious to see how Pan American reacts tomorrow. While I certainly have no idea what silver prices will do in the short term, I do believe that in the intermediate to longer term, silver prices will be at present levels or higher. I was bullish on Pan American Silver yesterday and even more bullish today.
Disclosure: Long Blue Nile Inc. and Pan American Silver Corporation shares and short Zale Corporation shares.
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