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Resist the urge to high-five everyone in the cubicles next to you. Your stock may have just strapped on a rocket pack and taken off for the moon, but smart investors won't celebrate until they know that upward leap was justified. Without a fundamental basis for the bounce, these stocks can quickly make the return trip down.
Is now the time to lock in profits, or is this just the first step toward even higher valuations down the road? Let's examine several stocks that just hit the afterburners, and see whether they're truly headed into orbit.
|China New Borun (Nasdaq: BORN )||
|Sinovac Biotech (NYSE: SVA )||
|Motricity (Nasdaq: MOTR )||
The market soared 151 points last week, or 1.4%, as Armageddon in Korea didn't arrive, and a host of datasets -- though not all -- gave a glimmer of economic recovery. But even among that general boost, the stocks that rose significantly more remain big deals.
The devil's in the details
China New Borun turns feedstock into grain-based alcohol. Edible alcohol can produce a wide range of other products including alcoholic drinks, cleaning solvents, perfumes, cosmetics, dyes, medicines, and yes, fuel. Borun's products are primarily sold to producers of baijiu, an alcoholic beverage sold throughout China in retail stores, bars, and restaurants.
Sales of Borun's edible ethanol solution jumped 26% last quarter, and full-year revenue is expected to rise 56% year over year. That was probably enough to allay concerns that Borun might be another shady Chinese small cap, after two directors abruptly resigned.
Even so, CAPS member mdrnsamurai thinks the stock got ahead of itself as a result of IPO enthusiasm: "Outstanding IPO, that is slowly returning to reality."
Tell us on the China New Borun CAPS page whether you believe this stock is more moonshine than fine wine.
Making it to the big time
Whether or not it has anything to do with Bill Gates' meeting with vaccine developer Sinovac Biotech last month, analysts at Brean Murray think enough of the company's potential to upgrade the stock to a buy, following positive notes Piper Jaffray recently filed. But there wasn't any specific news to account for the run-up it enjoyed on Friday, even though the dangerous avian flu was back in the news again. A Hong Kong resident last week became the first person from the country in seven years to contract the particularly deadly strain of the virus.
If we start to see more cases reported, look for other biotechs like Novavax (Nasdaq: NVAX ) and BioCryst Pharmaceuticals (Nasdaq: BCRX ) to get a boost, too. They all enjoyed big runs when last year's outbreak of the comparatively milder swine flu was supposedly going to be the second coming of the Black Plague.
CAPS member targetphil3 thinks management's interests are aligned with those of shareholders: "… could be a multibagger, high insider ownership, 46% eps 3yrs, 43% rev. growth 3yrs, plus upcoming trials."
You can keep track of Sinovac Biotech's progress by adding it to your watchlist, getting all the Foolish news and analysis aggregated for you in one place.
About to be gored?
While 70% of Motricity's revenue comes from AT&T (NYSE: T ) and Verzion, analysts at JPMorgan Chase think its recent deals with India's Reliance and Malaysia's Celcom could be prime catalysts for pushing the mobile carrier-sponsored data platform provider higher. The upgrade gave investors confidence to bump its shares up, although CAPS members remain diffident; 65% of All-Star members rating Motricity think it will underperform the broad market averages.
But Celcom is Malaysia's largest 3G mobile operator, with 11 million subscribers -- pretty impressive in a country with 28 million people. Reliance Communications is India's largest private-sector information and communications company, with more than 100 million subscribers.
larryrothman thinks the mobile app niche gives Motricity an edge: "Mobile apps are growing exponentially, [Motricity] is at the forefront with a longer term track record."
Be sure to add this company to the Fool's free portfolio tracker, and see whether investors will laugh all the way to the bank.
Going into orbit
Just because your stock has taken to the stratosphere doesn't mean it won't lose altitude. Markets are known for overreacting. A closer look at what's happened to your stock can give you an edge over other investors who merely follow the market's lead.
That's why it pays to start your own research on these stocks on Motley Fool CAPS, where you can read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from the stock's CAPS page. Then you can decide for yourself whether your stock's headed for re-entry, or off to infinity and beyond.