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)

Tuesday's Change

Silicon Motion Technology (Nasdaq: SIMO  )

****

34.89%

Manitowoc (NYSE: MTW  )

*****

27.40%

Hercules Offshore (Nasdaq: HERO  )

****

9.97%

Yesterday, the market jumped 148 points, or 1.2%, swearing off concerns about world tensions. Indeed, the indexes hit 30-month highs, and the Dow crossed strongly over the 12,000 mark. Yet stocks that went up by even larger percentages are still big deals.

The devil's in the details
Video controller maker Silicon Motion's quarter was a blur, as revenue soared 17% sequentially and profits grew 13%. Yet it's likely to just be the start of even bigger growth opportunities.

The tablet market represents the next big boom in computing -- currently defined as the iPad. But with scores of new models introduced in the past month, that dominance won't last. The tablet PC will be a robust marketplace of competing products, and Silicon Motion, rather than NVIDIA (Nasdaq: NVDA  ) or Advanced Micro Devices' (NYSE: AMD  ) ATI division, will grab the lion's share here.

Tablets aren't optimized for the 3D graphics performance in which those two specialize, so there's no reason for manufacturers to not go with Silicon Motion's low-power controllers. And since it's one of the few chipmakers offering hardware rotation capabilities (for example, turning your tablet to view an image in portrait mode), it's got huge potential.

If mobile computing through tablets and smartphones is the future -- and there's nothing to suggest it's not -- CAPS All-Star member TMFZahrim finds Silicon Motion still an attractive investment:

The stock is very reasonably valued in light of its growth prospects, assuming that tablets and smartphones stay hot for a few more years, and it's an alternative avenue to investing in SSD storage without buying drive builders STEC (Nasdaq: STEC  ) or SMART Modular Technologies (Nasdaq: SMOD  ) . I may have missed the ideal entry point when the stock was 30% cheaper, but there's still plenty of upside left in the stock.

Making it to the big time
After it posted growth in both the cranes and food-service segments of its business, investors bid up Manitowoc's shares. Although some analysts are concerned that it won't be able to maintain the momentum it's generated, Manitowoc seems to be gaining traction where rival Illinois Tool Works (NYSE: ITW  ) is slipping. The industrial rival reported profits that fell 19% from the year-ago period, and missed the targets analysts set.

CAPS member Turfscape understands the cautious tone analysts are taking, but salutes Manitowoc's diligence:

Manitowoc has taken the necessary steps to get its debt load under control and will be returning to profitability. The question remains whether the global economy will support growth for this maker of boats and cranes. China still has lots of potential for MTW, as does Mid-East markets, if political unrest and economic factors don't drag things down too far.

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

A Herculean effort
No particular news related to Hercules Offshore seemed to cause its stock to jump 19% yesterday. The Gulf of Mexico is still a no-drill zone, with Hercules and Seahawk Drilling owning two-thirds of the shallow-water rigs there. Yet with permits hard to come by, 60% of the rigs remain unleased. Dayrates are also in decline, and Hercules' balance sheet is in disrepair.

Yet even with the bump yesterday, Hercules still trades for less than its book value, which just might make it an attractive takeover candidate to someone. Leading jackup rig specialist Transocean (NYSE: RIG  ) has more than $1 billion sitting in its bank account for such a purchase. But even if Hercules stays independent, CAPS member kmacattack likes its chances for returning to profitability.

With more than 1,600 CAPS members weighing in on the driller, 97% say it will go on to beat the broad-market averages. You can add Hercules to the Fool's free portfolio tracker, then drill deeper on the Hercules Offshore CAPS page for further insights.

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 reentry, or off to infinity and beyond.

NVIDIA is a Motley Fool Stock Advisor pick. Illinois Tool Works is a Motley Fool Income Investor selection. The Fool owns shares of Transocean. 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  does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.


Read/Post Comments (5) | Recommend This Article (8)

Comments from our Foolish Readers

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 February 02, 2011, at 3:10 PM, joaquingrech wrote:

    I swear I thought I've read this article before Feb 2nd, 2011

    Is it a remake? If so, it should have an original date posted too so that we don't get confused with advices and how current they are.

  • Report this Comment On February 02, 2011, at 4:15 PM, judithjo wrote:

    I agree with joaquin. Many of these articles are reruns from eons ago. And it is TMF's obligation to inform us of how many times the article ran previously--including the dates.

  • Report this Comment On February 02, 2011, at 4:40 PM, maverick222 wrote:

    I believe the writer needs to get the facts straight in this article. Manitowoc SOLD THERE SHIP BUILDING BIZ IN 2009.

    Wow get it together Rich...

  • Report this Comment On February 02, 2011, at 8:04 PM, jbjam wrote:

    Dont see much growth in SIMO, they just don't have the technology or research abilities. Also tablet sales have been abysmal so far outside of the Ipad.

    I am slightly confused by this analysis... The ps3, xbox, wii- have no 2d - 2d games are just textures on polygons...

    Sony just announced it wants to invade the Tablet and Smart phone market via android...

    Next add in hi-def video, etc. . . nvidia, qualcomm, and a few others are posed for this- SIMO is not at all.

  • Report this Comment On February 03, 2011, at 6:11 PM, techoptimizer wrote:

    NVDA has the TEGRA chip and it's on the Elocity platform, which has the best price performance for Android that I have tested, as long as you don't want to pay for a fancy, but interpolated, Samsung screen, NVDA is my choice for the money...

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