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 move up was justified. Without a fundamental basis for the bounce, these stocks can quickly make a 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)
|
Thursday's Change
|
| Dot Hill Systems (Nasdaq: HILL ) |
** |
13.8% |
| Fuqi International (Nasdaq: FUQI ) |
**** |
12.2% |
| Dillard's (NYSE: DDS ) |
* |
11.8% |
Yesterday, the market fell more than 100 points, only to rally back before settling down essentially unchanged at the close. Stocks that went up significantly more during the market's roller-coaster ride are even bigger deals.
The devil's in the details
Storage specialist Dot Hill Systems was trading flat for most of the day when the rumors website FlyOnTheWall published something suggesting there was some sort of deal in the works with Oracle (Nasdaq: ORCL ) .
It wouldn't be a complete surprise if there was something afoot. Mergers and acquisitions activity in the storage space has been hot and heavy for some time, with big players Hewlett-Packard, Dell, and EMC taking out someone smaller. And Oracle did just make an announcement yesterday that it was going to make a "game changing" announcement at the end of the month that represents a "dramatic leap in storage technology."
If Oracle is interested in Dot Hill, CAPS member aqualen thinks the storage specialist has a niche that makes it a unique opportunity.
I like Dot Hill because they have strong, deep engineering and are solving storage problems the big names like EMC, [NetApp. ...] and others didn't want to bother with. HILL has a strong patent portfolio, and strong, multi-vendor relationships. They've survived some very tough times and I believe the market is now looking their way. In the months since I started accumulating, they continue to improve their bottom line. Past history is no guarantee of future returns.
Tell us what you think about the rumor on the Dot Hill Systems CAPS page or in the comments section below.
Making it to the big time
Chinese jewelry dealer Fuqi International is supposed to file financial reports with the Securities and Exchange Commission before the extended delisting deadline of March 28. Yesterday's action was unrelated to any news about the company, one of several small-cap Chinese companies facing allegations about the numbers they've reported. Shares of China Sky One Medical and RINO International were beaten down; Orient Paper (NYSE: ONP ) was also named.
While traders may be hoping the weekend brings some news, it's quite possible Fuqi International will go the way of RINO International and actually be delisted. The Nasdaq exchange sent Fuqi another notice saying that because the company hasn't solicited proxies or held an annual shareholders meeting, it's another factor the exchange can and will consider in the delisting decision.
CAPS member montgomeryil says Fuqi could come through, but that it's too risky.
With the SEC investigating and the NASDAQ threatening to delist, why waste any more [time] with this one. That being said, it appears that if the current fundamentals are accurate, buying the stock at this price is a value play-you are essentially buying $2 of assets for every $1 of stock purchases. So if the company is being honest, prices should eventually rise. But that's too high of a risk for me.
You can watch Fuqi's status by adding the stock to your watchlist and having all the Foolish news and analysis about it gathered in one place.
Squeezed to death
The decision by department store chain Dillard's to convert its real estate assets to a REIT may signal a smart opportunity to pry value out of its holdings for shareholders, or it could signal the top of yet another asset bubble for what has become a retail "dead zone."
The artificially low interest rate we're enjoying has enabled real estate investment trusts like Chimera Investment (NYSE: CIM ) to offer droolworthy dividend yields, but with global economies putting the brakes on their stimulus programs to rein in inflation, it could be last call for the party. Dillard's move may be too little, too late.
CAPS member kurtdabear thinks department stores and homebuilders would suit those interested in sabotaging their portfolio.
Discretionary spending is rapidly becoming impossible for tens of millions of Americans and is being viewed as unfashionable by millions more. If you're financially suicidal, by all means buy home builders and dept. stores. Otherwise, leave them alone for a while--say maybe 10 years or so.
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.
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