The markets are reversing course yet again, now rising after several consecutive down days. But resist the urge to high-five everyone in the cubicles next to you just because your stock just strapped on a rocket pack. 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.
(out of 5)
|Ivanhoe Mines (NYSE: IVN )
|Identive Group (Nasdaq: INVE )
|Universal Display (Nasdaq: PANL )
The market soared 322 points yesterday, or 3%, so stocks that went appreciably higher are pretty big deals.
Higher and higher
Apparently, certain stocks need to have an official stamp of approval from analysts before investors will jump in. Ivanhoe Mines reported Monday that its Oyu Tolgoi project in southern Mongolia is poised to begin the early steps needed to start production of the gold, silver, and copper it holds. The market's reaction? Ho-hum. The stock fell 4.5%.
The next day, analysts at TD Newcrest looked at the same info, and while saying the earliest Ivanhoe will start seeing any money from the project will be in late 2012 -- though more probably in the first half of 2013 -- it also updated its valuation model, causing it to raise its target price to $30 Canadian. That caused the stock to surge 20% on the day.
It was probably a little self-serving on Ivanhoe's part to use gold's hitting record levels of more than $1,900 an ounce to trot out a bit of puffery for itself, but the mine is eventually expected to produce more than 650,000 ounces of gold, 3 million ounces of silver, and 1.2 billion pounds of copper in its first 10 years of operation. The Oyu Tolgoi mine has such substantial promise that mining giant Rio Tinto (NYSE: RIO ) holds a 46.5% stake in Ivanhoe and is angling to take control of the project.
It is one of the world's largest copper and gold mines, and although Rio Tinto plans on selling most of the output to China, the country's state-run mining operation, Chinalco, is also maneuvering to acquire a minority stake in the mine.
Nearly 400 CAPS members have weighed in on the stock, with 85% of them believing Ivanhoe will ultimately outperform the market. Let us know on the Ivanhoe Mines CAPS page whether you think it will be able to retain enough of this mother lode to participate in the riches to come.
The nuclear option
Maybe it was the leak by RadioShack (NYSE: RSH ) that Google Wallet was about to go live that got investors salivating over Identive Group. After all, the near-field communications specialist has its own relationship with Google (Nasdaq: GOOG ) through a recently launched online NFC marketplace where businesses can get tags for Google's Places program, readers, software development, and more.
According to a report on Engadget yesterday, RadioShack apparently let slip that Google was readying a Sept. 1 launch of its Google Wallet technology at select stores. Near-field communications, coupled with Wallet, would allow consumers to wave their smartphones at readers to make purchases.
Although a follow-up suggests the launch won't really happen until later in the month, it's obvious NFC is about to go mainstream and investors are excited about what that means to some of the niche's top players, like Identive and NXP Semiconductors (Nasdaq: NXPI ) . Beyond the NFC realm, CAPS members like Ken311 find Identive's related digital security products to be a big draw: "Strong company with solid digital security products. As the government continues to get hacked there is more chance that further contracts with INVE will take place."
Add Identive to your watchlist then head over to the Identive CAPS page and let us know if it is near a big breakthrough.
Secure in the knowledge
You can say Universal Display is having a good week. In just two days of trading, its shares have jumped more than 45% in value. Monday saw the OLED screen outfit soaring 24% as LG Electronics announced that it would be offering OLED-equipped smartphones in mid-September, making it the one non-Samsung phone on the market so equipped.
That was followed Tuesday by the news that Universal Display and, yes, Samsung, had agreed to a long-term deal for its technology. While terms of the agreement weren't released, the deal is going to run until 2017, long enough to spark an additional 17% run-up in shares.
CAPS member drewsd35 is one investor expecting the technology to drive Universal Display higher. "New Tech and next generation of screens will help company boom again."
Add the stock to the Fool's free portfolio tracker to track all the news and analysis, then head over to the Universal Display CAPS page and display your reasons for rating the company.
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.