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)
|
Friday's Change
|
| GT Solar (Nasdaq: SOLR ) |
****
|
12.5%
|
| Penson Worldwide (Nasdaq: PNSN ) |
***
|
9.3%
|
| DryShips (Nasdaq: DRYS ) |
*****
|
8.4%
|
The economic data released last week confirmed that the economy remains dire. The markets fell more than 97 points, or almost 1%, on news that fewer jobs are being created, and unemployment is ticking higher again. (On the bright side, the service sector is showing some strength.) Amid all this grim news, stocks that rose significantly are pretty big deals.
The short story
For two industries that have had little to cheer about recently, GT Solar and DryShips' big one-day gains are an impressive achievement.
The solar sector has been plagued by worries over ever-greater subsidy cuts, a components supply glut, and overly ambitious expansion plans. Year to date, GT and SunPower (Nasdaq: SPWRA ) are just about the only solar shops reporting positive gains. ReneSola (NYSE: SOL ) and JA Solar (Nasdaq: JASO ) rank among the big losers, down 29% and 18%, respectively.
Similarly, the dry bulk shipping market has run aground as charter rates collapse among an overabundance of ships plying the seas. Eagle Bulk Shipping (Nasdaq: EGLE ) and Excel Maritime have fared worse, but DryShips' own performance has been disappointing to say the least.
GT Solar got a big bounce from booking its biggest order ever, a $460 million job for advanced sapphire crystallization furnaces. That one order represents more than half of the revenue the company recorded over the past year. FuelCell Energy also recently benefitted from an order that dwarfed what it made over the last 12 months, helping investors to realize that the industry and its individual companies are not as moribund as they sometimes appear.
In contrast, DryShips drew notice for its incredibly cheap valuation. Analysts at Goldman Sachs basically said you'd be a small-f fool to ignore the leading dry bulk shipper at this extreme valuation. Goldman believed the DryShips' shares were worth a lot more than what the market was giving it credit for. The analyst raised its target price to $6, a 57% premium to where DryShips had previously traded. Interestingly, Goldman said the glut of ships would likely hurt Diana Shipping, and thus downgraded it. Considering that Diana was carrying a similar multiple to DryShips, it's a rather perplexing analysis, though Diana sports a forward multiple almost three times greater.
Share your opinion on the solar shop or the dry bulk shipper on the GT Solar CAPS page or the DryShips CAPS page, and let us know whether you foresee more sunny days on the high seas.
Feeling energized
We said last week that we thought the sell-off in shares of Penson Worldwide was exaggerated. Sure, a director had previously undisclosed ties with a racetrack, and the securities clearinghouse was going to take a big writedown on its investment in it. But the director resigned, and the investment still had the possibility of turning a profit -- however slim -- so Penson's overall financial condition wouldn't take too much of a hit.
While analysts were concerned that rivals like MF Global could steal customers away in light of these revelations, the CAPS community remained steadfast in its belief that Penson would surmount these troubles and continue turning in market-beating results.
Now that its shares have bounced back, tell us what you think in the comments section below or on the Penson Worldwide CAPS page, and stay on top of the company's developments by adding it to your watchlist.
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 reentry, or off to infinity and beyond.
RSS Headlines
Fool UK