Whoa! My Stock Crushed the Market!

September came to an end and marked the market's worst quarter in three years, but just because your stock strapped on a rocket pack and went higher, resist the urge to high-five everyone in the cubicles next to you. 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 a pair of stocks that just hit the afterburners and see whether they're truly headed into orbit.

Stock

CAPS Rating (out of 5)

Friday's Change

NOAH Holdings (NYSE: NOAH  ) * 14.6%
YM BioSciences (AMEX: YMI  ) *** 10.7%

With the Dow Jones Industrial Average (INDEX: ^DJI) tumbling 240 points on Friday, or 2.2%, stocks that went appreciably higher are pretty big deals.

Family of funds
There was no company-specific news to account for the surge in NOAH Holdings' stock, but the shares have been swinging wildly from one extreme to the other lately so this movement is right in line with that.

However, starting Oct. 1, China deregulated its mutual fund distribution business, and NOAH -- along with other wealth managers like privately held Howbuy, and financial institutions such as HSBC -- planned on obtaining licenses. There's apparently plenty of opportunity for new entrants into the market, and investors might be warming to the idea that NOAH will be able to grab a decent-sized slice of the pie. While banks distribute almost two-thirds of the funds each year, other outlets like NOAH will be able to join the fray when the markets open to competition.

CAPS All-Stars are evenly split on its potential for success, perhaps because large international third parties will also be able to distribute funds, but the broader community is a little more enthusiastic about its chances, with 73% of those rating it thinking it can be the indexes.

Still, it's flying under the radar of most of Wall Street and Main Street, so tell us in the comments section below or on the NOAH Holdings CAPS page if you think it can distribute greater profits to investors, and then add the wealth manager to your watchlist to keep track of its progress.

A betting man
Short sellers correctly predicted the fall of cancer researcher YM BioSciences this past June, despite the biotech's positive data for its JAK1 and JAK2 Inhibitor CYT387 that was revealed in an earlier study. Shares of YM have fallen more than 50% from the highs it hit at the time.

But the company is back at it again, announcing it has enrolled the first of 60 patients in its phase 2 trial of CYT387 that is intended to further evaluate its safety and efficacy as well as test its ability to reduce spleen size, improve symptoms, and reduce transfusion dependence in patients with myelofibrosis.

Myelofibrosis is a disease where bone-marrow stem cells go awry and produce scar tissue instead of healthy bone marrow. Both Incyte (Nasdaq: INCY  ) and Novartis (NYSE: NVS  ) are pursuing a treatment for it as well with their drug ruxolitinib.

Early last month, the Fool's biotech guru Brian Orelli warned investors to watch for any capital raising efforts by YM if the stock grew by any appreciable amount. The jump in price on Friday might not be enough to trigger a secondary offering, but if it's able to put together successive up days like this, it may just come to fruition.

But earlier this year, CAPS member imshirazy suggested that barring bad data being reported -- which hasn't happened yet -- YM should progress smartly: "Not too many possible downsides except bad upcoming data results, which seem unlikely thus far. Hoping for the best."

Give us your views on what you expect from the trials on the YM BioSciences CAPS page, and you can stay on top of the company's developments by adding it to your watchlist.

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.

Fool contributor Rich Duprey holds no position in any company mentioned. Check out his holdings and a short bio. Motley Fool newsletter services have recommended buying shares of Novartis. 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. The Motley Fool has a disclosure policy.


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