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 big moves over the past five days.

Stock

CAPS Rating (out of 5)

Change Past Week

China Biotics (Nasdaq: CHBT  )

*

(36.0%)

Neoprobe (NYSE: NEOP  )

*

(29.2%)

Corinthian Colleges (Nasdaq: COCO  )

**

21.5%

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

Can't fight this fire
After almost hitting $18 a share at the start of the year, China Biotics has been tumbling ever after, save for a brief dead-cat bounce in April that has since seen the stock test new lows. The most recent setback was an article on TheStreet.com wherein the writer thought the company's staffing and sales claims were at best exaggerated. He was comfortable staying "extremely short" the stock.

In May, Andrew Left at Citron Research said China Biotics would probably face trouble when it came time for its audit, which is scheduled for this month. There's a whole universe of small-cap Chinese stocks that came to market through reverse mergers that have since been exposed as frauds or engaging in less-than-honest conduct. Longtop Financial (NYSE: LFT  ) is simply the most recent example.

Going public by RTO may offer some advantages, but with the steady stream of companies having been revealed as fraudulent entities, there's really little reason to trust that the remaining ones are honest actors. Reverse mergers used to be the province of penny-stock pump-and-dump schemes, and these small Chinese companies certainly seem to fit the mold well.

Highly rated CAPS All-Star joaquingrech says the list of those accusing China Biotics is growing steadily, and he'd simply swear it off: "All in all, it seems that although operational, they have vastly overstated production, income, earnings and most other important figures."

Is this just a case of piling on? The head over to the China Biotics CAPS page and let us know why you think the probiotics purveyor is different.

Testing the depths
I'm not conversant in whether Neoprobe's Lymphoseek -- a marker used to determine the spread of certain solid-tumor cancers into the lymphatic system -- is better than the current standard of care. But I do know that a lot of questions have been raised about whether the company is comparing apples to apples when it doesn't match up with what's being used today.

At an American Society of Clinical Oncology discussion the other day, questions were raised suggesting that the company was doomed to meet FDA resistance because it didn't compare Lymphoseek with the usual blue dye (VBD) and sulphur colloid combination, but rather just the blue dye, where it was able to detect more cancerous lymph nodes.

Neoprobe bulls point out that the combination is actually an "off-label" usage, while Neoprobe has said the FDA won't permit testing for efficacy against something not approved for the purpose. Seems Neoprobe is caught in a bit of a bind, but the market has grabbed hold of the bear case, driving the stock down 30% from its recent highs.

CAPS member Cheesus thinks the FDA will grant approval and notes that the company has another drug waiting in the wings as well.

Lymphoseek has passed two separate phase 3 trials, showing superiority over the drug (blue dye) currently used to detect cancer. There's 450 million right there if they charge the same price as blue dye, but they will charge more if the FDA does in fact give it to the superior label. Their next drug, which is actually their oldest drug, RigScan CR, has an estimate of 3 Billion.

Although almost 60% of CAPS members rating Neoprobe believe it will outperform the market, more than two-thirds of the All-Stars have doubts. Let us know in the comments section below whether you think the Neoprobe can test higher levels again.

Chipping away at value
Along with many others in the for-profit education sector, Corinthian Colleges was surprised by the Education Department's decision to water down the "gainful employment" requirement for schools, postponing the harshest sanctions possible until 2015. Considering the animus the Obama administration has exhibited toward the for-profit sector, it's not surprising that Apollo Group (NYSE: APOL  ) , DeVry (NYSE: DV  ) , and Bridgepoint Education (NYSE: BPI  ) all surged afterwards.

But the industry still has powerful enemies who somehow think it's surprising that individuals seeking alternative educational opportunities have higher default rates. They've also made much of the fact that the schools have delayed loan-default procedures against them. Although the critics say it's an attempt to "game the system," imagine the hullabaloo they would have raised had the schools actually moved against the students during this economic period.

Yet because these companies are still in the crosshairs, it's difficult to recommend them as an investment right now. Although 83% of CAPS members rating Corinthian Colleges think it can beat the broad indexes, the low two-star rating they've assigned it indicates their belief that there are better places for your money.

Add Corinthian to your watchlist to see whether it can graduate to a new sustainable high.

The Motley Fool owns shares of Bridgepoint Education, and Motley Fool newsletter services have recommended creating a call spread position in Bridgepoint Education. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Rich Duprey has no financial position in any of the stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (5)

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 June 08, 2011, at 11:43 PM, reachmygoals1 wrote:

    Here's NEOP analyst reports, I believe the product Lymphoseek is real and they have a consultant who is a former FDA director to assist them(thumbs up). In addition, the phase III trial design was guided by the FDA and NEOP gets check mark for due diligence.

    Ladenburg Thalmann, attractive entry point

    http://analystupdate7.blogspot.com/

    Rodman and Renshaw "Follow FDA Advice for Marketing Approval"

    https://rodman.bluematrix.com/docs/pdf/Rodman_&_Renshaw_...

  • Report this Comment On June 08, 2011, at 11:56 PM, GTGRAD wrote:

    Neoprobe is a solid stock with a superb long term future.

    The primary reason why this stock has tanked recently is because there are several brokers across America who sold this stock short in a big way. These guys are losing their shirts and they recently realized the company was on the verge of obtaining the FINAL (& very positive) Phase 3 trial results. One of these guys lives in California and had a SIGNIFICANT percentage of his client's money invested short in Neoprobe - betting/hoping the company stock will tank.......he was stressing out until he successfully manipulated the stock into a free-fall with his deceitful blog comments. These guys {short position stock brokers} are making a strong last minute attempt to bring the stock price down in the name of the all-mighty dollar. They should all be ashamed or maybe even prosecuted for these actions!!

    Do not be afraid of Neoprobe........I would not be surprised to see this stock at $7.00 - $9.00 by the end of 2011 and I expect it will be at $20.00 or higher by 2015! I bought a few thousand shares several years ago for $0.87/share and I have been researching and watching the stock for several years now. No worries here, but I do not appreciate what these unscrupulous stock brokers have done on the blogs recently.

  • Report this Comment On June 09, 2011, at 12:31 PM, holmessr wrote:

    With all due respect to the All-Stars who have their doubts about Neoprobe, I don't think one can follow hundreds of stocks closely. I wonder how many of them have carefully studied the company and its two key drugs. While there are uncertainties and risks with Neoprobe, just as there are with MF favorite Exelesis [also beaten down this week], the weight of the evidence suggests to me that Neoprobe is worth the risk at its current price under $4.00 per share.

  • Report this Comment On June 09, 2011, at 12:34 PM, billappledorf wrote:

    The FDA will definitely approve Lymphoseek because the FDA approved the study and in fact insisted that approval can never be based on comparison with an agent that itself has not been approved by the FDA.

    Bogus controversy fanned by hedge fund shorts swirls around whether Lymphoseek will be adopted after it is approved, but it will be because:

    1) Being on-label for the application it is used for, insurance companies will pay for Lymphoseek,

    2) Lymphoseek is smaller than filtered colloid and therefore clears the injection site faster (per phase 1 safety study in which filtered colloid was used as the control), improving patient flow by allowing injection during the pre-op instead of the day before,

    3) Lymphoseek injection site is painless compared to pain on injection of blue dye and filtered colloid.

    4) Lymphoseek has no reported adverse side effects.

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