Whoa! What Just Happened to My Stock?

Once again the markets reversed course, 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.

Stock

CAPS Rating (out of 5)

Thursday's Change

PharmAthene (NYSE: PIP  ) ** 18.5%
TiVo (Nasdaq: TIVO  ) ** 17.0%
Zillow (Nasdaq: Z  ) * 15.2%

The market dropped 171 points yesterday, or 1.5%, so stocks that went appreciably higher are pretty big deals.

The drama continues
Is resolution finally at hand for the long-simmering legal feud between PharmAthene and antiviral maker SIGA Technologies (Nasdaq: SIGA  ) ? There was no specific news to account for PharmAthene's jump yesterday (and SIGA fell more than 8%, too), which had some speculating good news was at hand. But it's also been speculated at times that SIGA will just go ahead and buy out PharmAthene.

The legal sparring started in 2006 after SIGA Technologies backed out of a deal to merge with PharmAthene after reporting positive results for its smallpox antiviral drug ST-246. However, the merger agreement had stipulated that if the deal fell through, the two would still go ahead with a joint marketing arrangement. Apparently, SIGA realized just how lucrative its antiviral was and tried to cut PharmAthene out.

However, the government rewrote the rules to essentially guarantee SIGA will win the contract, and now two congressional committees are investigating just how that came about. Although the Government Accountability Office had said the case would be settled this week, no decision has been forthcoming, hence the anticipation in the shares.

With 86% of those rating PharmAthene to outperform the broad market averages, it seems they're expecting the biotech to come out on top regardless. Tell us in the comments section below or on the PharmAthene CAPS page which way you think it will go.

Higher and higher
Fools look for companies with strong and growing organic growth, unaided by contributions from acquisitions, tax benefits, or other one-time cash infusions. Digital video recorder specialist TiVo has been showing growth, but all too often it has been from such one-time sources like legal settlements from DISH Network (Nasdaq: DISH  ) and EchoStar (Nasdaq: SATS  ) .

This quarter, though, TiVo reported sales soared 19% as technology licensing revenue more than doubled from last year. Without any comparison, the DVR maker was able to narrow its losses to $0.17 a share, lower than what analysts were anticipating.

And why shouldn't we see these kinds of numbers in the future, too? The pioneering recording expert won decisive legal victories protecting its patents from the incursion of interlopers like DISH and EchoStar. They're now licensing the technology and TiVo is building both software and hardware products that systems across the country will buy.

What really has CAPS members going now, however, is the possibility of a buyout. kryptonite09 thinks the time is right: "With [Google] taking out [Motorola Mobility], the Internet video space has become exciting again. TIVO could easily become a takeover target. With a $1bn market cap, it won't be that difficult."

Add TiVo to your watchlist then head over to the TiVo CAPS page and record your thoughts on its future.

Deep in the thick of it
Unlike housing, or the economy for that matter, real estate information provider Zillow is showing growth. Having gone public only a month ago, and displaying a stock price chart that resembles housing's latest sales numbers, it was able to record a profit as monthly unique users nearly doubled during the quarter to a record 20.8 million.

It bodes well for the future. People are perusing Zillow's site looking for information on housing, so if the industry ever does turn around it will be entrenched as the go-to site for data. Of course, as the number of 30-day delinquencies jumped for the second straight quarter in June, maybe homeowners were just seeing how far underwater their mortgages really were.

Zillow's marketplace revenue increased 269%, consisting of subscriptions sold to real estate agents and cost-per-click advertising. All those new eyeballs it generates are key to that growth, as well as stealing share from Move (Nasdaq: MOVE  ) , the parent of Realtor.com.

From personal experience I know that each month Zillow sends me an email telling me how much my property value has risen or declined in the past 30 days (I assure you it's more often than not a decline). Included in the email is a link to the site to check on your own property and others in the area. "Unique users" is how many users visit the website once each month.

Yet with four out of five CAPS members rating Zillow to underperform the broad indexes, it's likely they imagine consumers will tire of seeing their values decline and just stop visiting. Lower unique users will lead to lower ad revenues. But move in on the Zillow CAPS page and let us know if you think it will be part of the American Dream of homeownership.

Going into orbit
That's why 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.

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 (10) | Recommend This Article (9)

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 August 26, 2011, at 6:39 PM, boobliegooblie wrote:

    I am a SIGA stockholder, and until I read this article, I was unaware of "Two Congressional Investigations"...A politician named Issa (sp) mentioned they would investigate the way the contract was awarded some time back. Nothing was ever heard again about this, and many speculated his ties to a competing company, or perceived ties, would not look good for him or his future political career.

    What other investigation? Perhaps the author could be a little clearer.

  • Report this Comment On August 27, 2011, at 7:50 AM, TMFCop wrote:

    boobliegooblie,

    The two congressional investigations are the one you mention with Rep. Darryl Issa and the House Oversight and Government Reform Committee; the second is Rep. Sam Graves who chairs the House Small Business Committee.

    While I've read of those contributions to Issa as well, somehow $10,000 or so over a 5+ year period hardly seems to be a "bought and paid for" politician, or even enough to make him break a sweat. SIGA's political connections seem far more insidious, particularly the SEIU link.

    And no one seems to have managed to come up with a nefarious purpose for Graves, so they just forget about him. Issa, being the more high-profile player, generates the most attention.

    Both, though, have requested documents from HHS Secretary Sebelius. Unfortunately, nothing ever runs smooth or fast in Washington, so even if SIGA was awarded the contract fairly (which I'll admit I think seems suspect) the foot-dragging that goes on delays resolution of the situation.

    However, the GAO report won't be forthcoming. Chimerix withdrew its protest of the SIGA contract when BARDA deleted the 12 million optional courses from the agreement. That's why SIGA got to sell the 1.2 million courses it did back in June. That occurred two weeks after the congressional investigations were launched. Coincidental, no?

    Now the much larger portion of the contract is up for competition, and perhaps that is why we haven't heard much from Issa or Graves about their investigations since (as well as the fact that there's a lot of other issues on their plate too).

    Thanks for reading.

    Rich

  • Report this Comment On August 27, 2011, at 9:56 AM, boobliegooblie wrote:

    Thank You for the response Rich. Then this is news to me, that the investigations are ongoing. My next question would be why are you of the opinion the contract award is suspicious?

    Is there another company out there than can produce what BARDA is seeking? Chemerix cannot - their drug doesnt work. SIGA's does. If you are up on the investigations, you must be up on the fact Chermerix's drug doesn't work, and that there is no competitor that makes a similar, viable, product. Please correct me if I am wrong.

  • Report this Comment On August 27, 2011, at 11:27 AM, markt1271 wrote:

    How does a BARDA contract become suspect, when it is a SOLE source awarded one. If a company has a product to sell, and no one else is able to produce the same, how is that suspect? I don't care how many crooked politicians it takes to make a stock plummet, it is what it is, like it or not, there's nothing to dispute at this level.

  • Report this Comment On August 28, 2011, at 12:52 AM, gladiator2011 wrote:

    Rich,

    I will make sure to forward this response from KageGlantz to your badly researched, rediculous writeup to your editors and colleagues...perhaps they will publish a retraction OR will investigate the issue further...and then update you on all your inaccuracies. Keep writing, Rich...

    "...You don't seem to have a very good handle on SIGA's contract from BARDA. First, they sold 1.7 million courses, not 1.2 million. Second, you wrote Siga getting the contract (instead of Chimerix) "seems suspect." But if you knew anything about it, you would know better. Siga's drug st-246 has a perfect record in ALL of its MANY efficacy trials against various kinds of pox viruses (including monkeypox), as well as an envious safety record -- one person got headaches -- that the CEO said was comparable to Tylenol, though it probably is a good bit safer than Tylenol. And what about Chimerix's CMX-001? Well, it's only done one efficacy trial among primates... and all the monkeys died. That's it: one test, zero percent success. Any rational observer would say that st-246 getting the contract was the only logical conclusion

    In fact, it was some of Chimerix's no less than 8 protests that actually got the rules changed first. Efficacy against monkeypox was one of the initial standards for the RFP; Chimerix protested and got the RFP changed. In fact, they ended up asking BARDA to use the SAFETY results for CMX-001 and the EFFICACY results for Cidofovir, the drug which CMX-001 is derived from. The classic bait and switch. Why would BARDA allow them to do that? Because they needed to have a second qualifying competitor in order to keep the RFP under the SBA domain. Of course, as soon as SIGA got the contract, Chimerix protested again, claiming that SIGA (a company of 55 employees) wasn't REALLY a Small Business, because Ronald Perelman owns 30% of the stock. Amazingly, Chimerix won that protest. All in all, they managed to have the RFP delayed for two years. And you say that SIGA is the suspect party, because Perelman contributed money to Obama's campaign? If you don't know about the power of MLA, Chimerix's law firm and lobbying firm, you don't know diddley about Washington. By the way, MLA had a lunch seminar, and guess who they flew in as featured speaker? Right: Congressman Issa.

    Incidentally, Issa asked the White House for all communications to Barda about the contract that Siga won. But whoops -- there were no communications. Does it really sound suspect to you? Or does the coordinated protest, with Issa and Graves trumpeting objections, supported by pieces like yours, while SIga's price drops to 33% of its former worth -- doesn't that in itself seem more suspect to you?

    Maybe you want to be objective, and maybe you don't. But if you want to be objective, you'll correct your story:

    SIGA is the rightful winner of that contract. Anything other than that would be a Washington joke..."

    from KageGlantz

  • Report this Comment On August 28, 2011, at 10:13 AM, Pietroc wrote:

    Gladiator,

    Thank you for posting that correction to such a wreckless article. There appears to be less and less journalistic integrity nowadays. It's pretty pathetic when one finds more research based writing in the response vs. the actual article itself. We should petition to have an investigation launched on the various organizations writing this type of stuff and whether ot not they have ties to the companies they slant articles for.

  • Report this Comment On August 29, 2011, at 11:47 AM, boobliegooblie wrote:

    Rich, I look forward to any feedback you may have after researching SIGA further.

    Thanks

  • Report this Comment On August 30, 2011, at 8:24 AM, boobliegooblie wrote:

    Rich, are you on vacation?

  • Report this Comment On August 31, 2011, at 1:38 PM, boobliegooblie wrote:

    Rich, I thought I would try one more time. In light of your original story and then your follow-up reply, can you at least explain to readers your feeling that SIGA's contract award was suspicious?

    Are you going to back up your comments in light of the replies, or are you going to hide?

    Your knowledge of the story shows you at least did a little homework. Your inability to reply to other comments on this article are making you look like an insincere, biased, reporter. Just my opinion.

  • Report this Comment On September 13, 2011, at 12:08 PM, boobliegooblie wrote:

    Whoa...How is it that a guy can write an article and do minimal homework, and say things that are speculative, and then not come back and visit his post and defend it? ( He did once. Is that the rule with MF?) The author of this story clearly does not understand the company he was commenting on, and yet, has license to just post whatever he wants. Gives Motley Fool a bad name.

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