Whoa! What Just Happened to My Stock?

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.

Stock

CAPS Rating (out of 5)

Wednesday's Change

Zale (NYSE: ZLC  ) * 42.9%
ITT (NYSE: ITT  ) **** 16.5%
NVIDIA (Nasdaq: NVDA  ) **** 15%

Reversing several days of steady declines, the bulls took charge in the market yesterday, jumping nearly a full percentage point to get things going again. Yet stocks that went up significantly more are even bigger deals.

The devil's in the details
Just last week we were wondering what the heck was happening to Zale's stock because it fell sharply one day. Traders were supposedly betting that the diamond retailer wouldn't be able to maintain the momentum that led it to triple in value over the past six months. Without the lighter business model of a Blue Nile or the luxury cachet of Tiffany (NYSE: TIF  ) , the argument that Zale couldn't keep up the torrid growth seemed to make sense.

That was certainly the thinking of CAPS member baselineace, who noted the negative general consensus.

After working in the jewelry industry for 10 years, I can assure you that NO ONE thinks Zales will make it.

Yet Zale surprised everyone by showing that diamonds are investors' best friend, too. Zale said same-store sales jumped 8.5% in December. Even though Tiffany was only able to generate a 3% increase at its flagship New York store -- a weak showing, according to analysts -- comps were up 10% elsewhere and it did post much higher net sales, too, leading it to raise guidance for the year.

Zale hasn't followed up with any new guidance, but it says its cost-cutting initiatives, the management shake-up, and the focus on selling diamonds has made all the difference.

Although the broader CAPS community tilts slightly negative on Zale's potential, All-Star members lean in its favor, with 54% expecting it to beat the market. That's not exactly a ringing endorsement, but you can tell us what you think on the Zale CAPS page.

Making it to the big time
One plus three equals really big share gains for diversified industrialist ITT, which decided to split itself into three companies to try to mollify investor concerns that its defense business was holding it back.

Pentagon budget cuts are a threat to ITT, Boeing (NYSE: BA  ) , Lockheed Martin, and other contractors, which will be competing for slices of a much smaller pie. The rest of the businesses should be able to grow stronger as commercial and industrial markets continue their recovery. ITT will keep the aerospace, transportation, energy, and industrial engineering businesses, while the defense and water technology segments will spin off.

All-Star CAPS member aguadaboca says investors shouldn't write off the defense business just yet.

company announced, like Motorola, splitting cmpany into 3 cos...Defense buss hurt stocks performance, so investors happy, and many will look to defense buss srock as a buy with turn around as economy advances and Republicans back in congress! and,water buss will find favor for investors focused on this area.P/E's will go up!

You can watch ITT's progress by adding the stock to your watchlist and having all the Foolish news and analysis about it gathered in one place.

Squeezed to death
Sure, NVIDIA's shares jumped a lot yesterday, but they have been on a tear since the new year began, rising more than 50%. In fact, the chip maker's shares have doubled in just the past three months. Chips, in general, are moving up on the hope that mobile computing will spark a new era of growth, with Micron also moving 7% higher.

For NVIDIA, however, a legal settlement with Intel (Nasdaq: INTC  ) means it will receive $1.5 billion in exchange for providing Intel access to its graphic chips technology. This comes at a good time because Advanced Micro Devices (NYSE: AMD  ) is in the midst of a shake-up and is vulnerable to losing market share.

CAPS member JDAR5715 says the proliferation of tablet computers will help bolster the mobile computing bid, a point All-Star Terapixel would likely have problems arguing with.

Windows on ARM processors Nvidia is leader in hybrid ARM GPU chips = A new era for Nvidia in smartphones, tablets, netbooks, nettops, and even servers (ARM = power efficiency).

Going into orbit
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.

Intel and ITT are Motley Fool Inside Value selections. Blue Nile is a Motley Fool Rule Breakers pick. NVIDIA is a Motley Fool Stock Advisor recommendation. Motley Fool Options has recommended buying calls on Intel. The Fool owns shares of Lockheed Martin. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Rich Duprey owns shares in the Motorola spinoffs, Motorola Solutions and Motorola Mobility, but does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.


Read/Post Comments (3) | Recommend This Article (5)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 13, 2011, at 2:50 PM, BEACHesq wrote:

    RETAIL SALES ARE NOT GOOD, PERIOD! THIS IS ALL HOOKUM GENERATED BY STOCK ANALYSTS TO TRY AND GET THEIR DEAD BEAT PICKS UP SO THEY CAN WORM OUT. AND THEN THE GOV BUYS INTO IT.

    TAKE TIFFANY- TOTAL BAD SEASON! YES, THE NYC STORE WAS UP 3% BUT THAT IS SPECIAL FOR NYC IS FLOODED WITH TOURISTS WHO COME TO SHOP FOR IT COSTS MORE IN CHINA THAN HERE, OR KOREA, OR JAPAN, ETC. DONT BELIEVE ME THEN GO THERE.

    I KNOW AS A FACT THAT 2 OF TIF'S NJ STORES WERE DOWN! I CANNOT SPEAK FOR THE THIRD. AND ZALES IS JUST JUNK. IF YOU SPEND REAL MONEY THERE YOU DESERVE WHAT YOU GET. YOU MAY AS WELL PAY RETAIL BROKERAGE COMMISSIONS , TOO.

  • Report this Comment On January 13, 2011, at 3:32 PM, mcmic wrote:

    First off all caps is a terrible thing to do. Second, try tojustify what you are saying with numbers or graphs or some other PROVABLE evidence. I can't speak for the others but NVDA has a potential bright future depending on future tablet/server/phone sales all based off it's new chip and microsofts new operating system. In any event, Have a good day and remember to research why these stocks are rising.

  • Report this Comment On January 24, 2011, at 7:28 AM, GeorgePThomas wrote:

    When in Dec 31st 1994, "OLD BWIA" ended and the new airline "NEW BWIA" began, the CLICO - OLD BWIA 1971 Staff Pension Plan also ended. This 1971 Staff Pension Plan had generated more than $376 millions (of profit) surplus. Under the Valley Agreement, OLD BWIA workers were to get a third of that surplus in 1995. In violation of the “The BWIA Pension Plan Rules and Trust Deed” which states that “no payment of any part of the fund or any benefits of the plan shall be made to the company”, BWIA was also granted $176 million, through the reckless action of Republic Bank, the workers trustee.

    Up to today, it seems that efforts are still being made to deprive OLD BWIA workers of monies from that one third portion of the surplus, namely those monies which were meant to buy (for the OLD BWIA workers) shares amounting to 15.5% of NEW BWIA, with an option to buy a further 10% of NEW BWIA, and to thus become BWIA majority shareholders.

    There are concerns about why CLICO, NEW BWIA, the plan actuary Buck Consultants and WISE (West Indies Stockbrokers Limited), and others ... are keeping NEW BWIA Valley Agreement "Shares" information secret from the OLD BWIA workers who have a right to know where their monies (tens of millions of dollars) went more than 15 years ago. The Unions have asked by writing and not received a reply. A veil of secrecy gives the impression that there is something to hide.

    Last year, in the newspapers there was an offer of an ex-gratia payment 20 cents per share to all BWIA minority shareholders and former employees. Many names were included of persons who never bought BWIA shares. It appears that there is a deliberate to confuse {A} {BWIA shareholders and former employees who bought out of their own pocket "BWIA shares" sold on the local stock exchange, (April, 1999)}, with (B) [CLICO - OLD BWIA 1971 Staff Pension Plan Surplus members who were entitled to the March 29th 1995, "Valley Agreement NEW BWIA Shares" which never came to pass].

    Members of the 1971 Staff Pension Plan could not have bought "March 29th 1995, Valley Agreement NEW BWIA Shares" because the Shares part of the "March 29th 1995, Valley Agreement" was never honoured. For the entire time since March 29th 1995, OLD BWIA workers never received NEW BWIA shareholder benefits. "Valley Agreement NEW BWIA Shares" certificates were never issued to those OLD BWIA workers. OLD BWIA workers were never invited to a NEW BWIA shareholders meeting.

    Mr. Jerry Hospedales, Chairman, BWIA West Indies Airways Limited, C/o The Divestment Secretariat Ministry of Finance, Eric Williams Financial Complex, Independence Square knows this.

    It is my feeling that OLD BWIA workers should therefore not be made to pay for shares that they never received.

    Based on the above, the monies of the OLD BWIA 1971 Staff Pension Plan members (valued at $1USD+ for each Valley Agreement NEW BWIA Share), which were withheld from those same members for the purpose of buying NEW BWIA shares, should be returned to those same members.

    IT IS TIME TO END THE MOCKERY OF JUSTICE THAT HAS EXISTED FOR TOO LONG.

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