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)

Past Week's Change

SGI (Nasdaq: SGI  )

***

53.79%

Fronteer Gold (NYSE: FRG  )

****

43.52%

Research Frontiers (Nasdaq: REFR  )

****

41.81%

The market has enjoyed seven straight days of closing higher, swearing off concerns about world tensions. Indeed, the indexes hit 30-months highs, and the Dow crossed strongly over the 12,000 mark. So stocks that went up even more over the past week are even bigger deals.

New frontiers in investing
It seems that any stock with "frontier" in its name, regardless of the spelling, was a sure winning bet this past week. Yet high-powered mainframe computer maker SGI truly explored new frontiers this week. Surging revenue and a very bright outlook for 2011 helped propel the stock upward, as record sales gave the company the best quarter in its tortured history. SGI is the scion of Silicon Graphics, a tech-boom darling that was eventually bought out and rechristened SGI by Rackable Systems after it fell on hard times.

Enterprise-level tech spending has convinced some that the recovery is real. SGI is capitalizing on it by adding new contracts, not only with big businesses like Amazon.com (Nasdaq: AMZN  ) and Microsoft (Nasdaq: MSFT  ) , but also with the military. SGI counts on government business for a large portion of its revenue, and it won business with defense contractor Lockheed Martin (NYSE: LMT  ) as well. Business is so good that the computer maker raised revenue guidance for the year to $595 million; SGI now says it expects to make a profit.

With 92% of CAPS members rating SGI to outperform the market, it seems they agree that an investment here computes. But you can calculate its odds of victory by adding your own opinion on the SGI CAPS page.

Making it to the big time
With measured and indicated gold resources of 4.2 million ounces, and another 1.7 million ounces of inferred resources at its Long Canyon, Northumberland, and Sandman mines in Nevada, Fronteer Gold proved to be just too irresistible to Newmont Mining (NYSE: NEM  ) , which has its own gold mining operations in close proximity. Newmont agreed to buy the junior miner for $2.3 billion, sending Fronteer's shares soaring.

While Wall Street had been evenly split about Fronteer's prospects, just a few months ago Christopher Barker and Toby Shute, the Fool's top resources experts, identified Fronteer's Long Canyon and Northumberland projects as some of the country's best mining opportunities. Management's knack for finding gold began attracting investors, who agreed that Fronteer represented a monster opportunity for growth.

likesmoney timed his entry into Fronteer just right, believing that its growth cycle made now the time to scale back in. You can follow along on the levers Newmont will pull by adding the stock to the Fool's free portfolio tracker.

The sky's the limit
Even though Research Frontiers wasn't getting bought out, a deal with Mercedes-Benz to include its patented SPD-Smart light-control technology in upcoming models still sent shares higher. Mercedes wants to use the technology in its Magic Sky Control feature, allowing motorists to instantly change sunroof glass from dark to clear at the press of a button.

However, there was no specific value attached to the deal, and CAPS All-Star paperpump thinks Research Frontier will soon return to form:

This company has a proven track record. It has proven its ability to raise its share count every year since its inception. This company is adept and unmatched in its ability to lose money. Im betting on more of the same.

A lot of investors agree, and All-Star CAPS members think the technology specialist can't beat the market by a ratio of 10-to-1. Tell us on the Research Frontiers CAPS page whether you think the odds are in its favor now.

Going into orbit
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.

Microsoft is a Motley Fool Inside Value pick. Amazon.com is a Motley Fool Stock Advisor recommendation. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Lockheed Martin, and Microsoft. 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 (4) | Recommend This Article (6)

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 09, 2011, at 3:49 PM, fundamentalist4 wrote:

    Rich....I think you are mistakened about Research Frontiers being bought out....or, am I the one who is mistakened? There is no mention in last 8 or 9 releases of this.

  • Report this Comment On February 09, 2011, at 4:07 PM, rsinj wrote:

    refr is not being bought out. Author didn't understand what he was reading and is typical when someone writes fluff for a hobby.

  • Report this Comment On February 09, 2011, at 4:32 PM, TMFCop wrote:

    fundamentalist4,

    That was a typo there. It was supposed to say REFR "wasn't" getting bought out, referencing the Fronteer Gold section just above it. I'll have it corrected right away.

    And rsinj, thanks for your understanding. Cheers.

    Fluffy Rich

  • Report this Comment On February 09, 2011, at 9:44 PM, aseflong wrote:

    REFR has licensed out its technology to many glass manufacturers. I think its technology is too expensive for the architectural glass application. But its use in high end cars, aircrafts and yachts is a distinct possibility. I got tired of waiting for it. Now I might get back in should it retrace significantly.

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