3 Stocks Stopping the Presses

You saw the headlines. You know your stock price made a big move. But what does that portend for your investment's future?

By pairing the latest news with the collective wisdom of our 170,000-strong Motley Fool CAPS investing community, we might be able to discover whether your stock's latest exploits are a short-term hiccup -- or the start of a much bigger trend.

The following stocks have all made major moves over the past five days:

Stock

CAPS Rating (out of 5)

Change Past Week

Gulf Resources (Nasdaq: GFRE  )

**

64.7%

Orthovita (Nasdaq: VITA  )

*

35.3%

Eastman Kodak (NYSE: EK  )

**

27.7%

Source: Motley Fool CAPS; % change from May 11-18.

Can't fight this fire
First bromine maker Gulf Resources had short sellers on the run as its earnings release approached, sending the stock soaring. Now the company's proved that those shorts had good reason to run. First-quarter profits rose 80% and revenue increased 53%, all thanks to rising bromine prices.

We noted last October that Gulf was raising prices because of rising demand. So was U.S.-based Albermarle (NYSE: ALB  ) , which uses the specialty chemical in fire retardants. There was a bit of foreshadowing of Gulf's results when Albermarle reported its own earnings last month, posting a 20% increase in revenue that led to a 67% jump in earnings. With bromine prices nearly double their year-ago level, Gulf's results may have been a foregone conclusion.

Unfortunately, Gulf Resources still labors under a cloud of suspicion, amid charges of financial impropriety. The stock once traded as high as almost $12 a share, but currently sits 63% below that point, even with the generous bounce it's received this week.

With 91% of the 467 CAPS members who've rated Gulf Resources predicting it will outperform the broad market averages, it seems that our community believes this company will put the wisp of scandal behind it. But its two-star CAPS rating also suggests that our investors think there are better places for your money. Head over to the Gulf Resources CAPS page and let us know whether the allegations are just bromides that the company will be able to surmount.

A stiff backbone
Investors in "bone spackle" maker Orthovita have been waiting for years for someone to take note of the special opportunity its innovative product provides. Outpatient usage has grown at the expense of the margins that an inpatient setting would provide, and despite FDA approval for new indications for Cortoss -- a paste that mimics the properties of weight-bearing cortical bone, helping to make fractured bones stronger -- and a close manufacturing relationship with Kensey Nash (Nasdaq: KNSY  ) , its stock has remained mired in the low single digits.

Apparently, medical device maker Stryker (NYSE: SYK  ) saw the company's potential. It will scoop up Orthovita for $316 million in cash, or $3.85 per share. That's a 41% premium to where it traded before the deal was announced. I would've thought the company was worth more than that, but since it was stuck with its low-margin business, I'd rather the company realize its inherent value now than wait for practitioners to wake up to the possibilities later.

CAPS member BACnumber1 couldn't have timed it much better, arguing late last month that with an aging population, Orthovita's specialty in spinal was sure to offer huge growth potential. He considered it his best long-term pick, if by "long term," he meant three weeks:

Because it will only grow. Think about it. With the baby boomers getting older, and the life expectancy rate going up, there will be a much greater need for healthcare in general. But I like this company because it specializes in spine surgery, and people with crooked, bent spines is an epidemic that is only going to grow. Even with the youth, teens and adults playing video games tend to have bad posture, thus leading to spinal problems.

Let us know in the comments section below whether you think the deal will go through, or what your own best long-term CAPS pick might be.

Just patent leather
It seems Lazarus is still with us. Eastman Kodak won a round in its patent infringement battle against Research In Motion (Nasdaq: RIMM  ) and Apple. Investigators for the International Trade Commission sided with Kodak's argument that the two cellphone makers violated Kodak's patents on previewing images taken on the built-in cameras. That's right: If phone makers want to let you take a picture and look at it, Kodak says it deserves to be paid for the right to include that feature.

Although a patent attorney recently excoriated me for expounding on issues I apparently know nothing about, I maintain that such obvious features shouldn't be patentable. As I've stated before, I believe that Amazon's "one-click checkout" and MercExchange's ability to bludgeon eBay over its "Buy It Now" feature are patently offensive abuses of the patent system.

Kodak will live on a little longer, but there's nothing forcing the ITC to go along with its investigators' conclusions. Whether or not the agency agrees with its fact-finders that no harm would arise from banning the importation of BlackBerrys and iPhones remains to be seen.

CAPS member Red777aetrof agrees that much of Kodak's business model is dying a slow death, but he suggests you'd be remiss not to consider the good that can come out of its printing business:

alot of noise covers up the progress making in printing. commercial inkjet will do to offset printing what digital did to film. in consumer inkjet, it's a huge annuity profit pool, where Kodak has a fundamentally superior business model by attacking the competitors where they cant respond (because they need to protect their ink profits). Rest of business is dying or dogs.

Add Eastman Kodak to your watchlist to see whether it can still patent a growth story.

The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended Stryker, Amazon.com, Apple, and eBay, as well as recommending creating a bull call spread position in Apple. 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. The Motley Fool has a disclosure policy.

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.


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

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 May 20, 2011, at 8:36 AM, Intrepid11 wrote:

    Your comment on Kodak and patents underscores the 'fool' part of your name. The entire purpose of the idea of patent protection is to encourage invention and innovation, which is at the very core of American technological prowess. If one invents a new way of doing something that is 'patentable' i.e. worthy of patent protection, a decision that is made by expert lawyers at the U.S. Patent Office, no one else can legally 'use' that idea in a commercial product, without obtaining a 'license' from the owner of the patent. In patent litigation such as we have between Kodak and Apple/RIMM, a court must first determine whether the original patent is valid, then whether the defendant has copied and used it commercially. To write as casually as you have that Kodak's patent is or should be invalid demonstrates both your ignorance of the purpose of patents and of the fact that the Kodak invention on which its patent is based is not 'obvious' - if it were, the original Kodak patent would not have been allowed.

  • Report this Comment On May 20, 2011, at 11:10 AM, Red777aetrof wrote:

    i agree with Intrepid11 in that the writer seems to be expressing a political/philosophical/technical opinion in an area where his qualifications is suspect. the most successful inventions are obvious in hindsight (because the idea becomes predominant) - the round wheel?

    in this case, it isn't the concept of "preview" but rather the 218 patent deals with employing 2 different image processors concurrently where the high resolution image processor is used to capture the image while a separate lower resolution motion processor is employed to display a preview screen.

    Whether kodak should prevail is up to legal and technical experts more experienced and smarter then any of us. However, a prior ALJ in earliar LG/Samsung investigation, the OUII staff in both the earliar case and again in this investigation, and the US Patent Office (3 times on re-examination) had concluded differently on 218 then Chief ALJ Luckern in this case, so the conclusion is not without doubt (as there is evidently a conflict in opinions).

    The safest bet is probably an option straddle in the near term given the significant event risk.

  • Report this Comment On May 25, 2011, at 1:27 PM, philip2011 wrote:

    Do not you think that the rimm and apple should pay loyalty to EK for each piece they sold?

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