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Leigh Baldwin & Co.

112 Albany Street, Cazenovia, NY 13035 | Phone: (315) 655-2964 Toll Free: 1-800-659-8044

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Diamonds and Dogs

8/2/12

Knight Capital Group Inc. (KCG)

It was a "Knight-mare" of a day for Knight Capital Group as it crashed an astonishing 62.82% to $2.58. In the mother of all computer glitches, market-making firm lost $440 million in 30 minutes yesterday when its trading software went awry. Between 9:30 a.m. and 10:00 a.m. EDT, one of Knights trading algorithms reportedly started pushing erratic trades through on nearly 150 different stocks, from Berkshire Hathaway to Exelon. The loss is four times it company's net income from all of 2011, and a lot more than most analysts were estimating. Knight's buggy algorithm was apparently buying high and selling low; losing the company the difference in price each time. In the case of Exelon, that means losing about 15 cents on every pair of trades. With the program trading 2,400 times per minute, its easy to see how the company lost money so quickly.

Green Mountain Coffee Roasters Inc. (GMCR)

Green Mountain Coffee is brewing today, up 26.51% at $22.66. The company won back the confidence of Wall Street with a lower-than-expected full year earnings forecast that was seen as more realistic and reliable. Green Mountain's latest outlook calls for 2013 earnings of $2.55 to $2.65 per share, well below analysts' average estimate of $2.97. Along with this, the company released better-than-expected quarterly earnings with a reported 30% increase in third-quarter profit to $73.3 million, or $0.46 per share, plus a 21% increase in net sales. To further boost the stock, analyst Marc Riddick noted that there was a large amount of short covering taking place which also pushed prices higher. The company seemed to begin to climb up its mountain again but it is still very far from its peak (52-week high) of $115.98.
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