The market roared to life on the hope that Europe saved itself, but just because your stock strapped on a rocket pack and went even 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 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
|
| Suntech Power (NYSE: STP ) |
**** |
29.7% |
| VASCO Data Security (Nasdaq: VDSI ) |
**** |
29.5% |
| Terex (NYSE: TEX ) |
**** |
18.7% |
With the markets soaring 339 points yesterday, or 2.9%, stocks that went appreciably higher are pretty big deals.
Shining a light on growth
The financial deal in Europe helped calm jittery nerves in the solar sector, helping push PV maker Suntech Power in particular higher because of its exposure to the continent, where it derives more than three-quarters of its revenues. First Solar (Nasdaq: FSLR ) , which moved almost 15% higher yesterday, realizes a similar percentage of sales from Europe.
The news had a broad-based effect on the industry, though, as LDK Solar (NYSE: LDK ) , which generates 35% of its sales in Europe, moved 23% higher on the day. Overall, the entire CAPS Solar Power sector ran up 6% yesterday, indicating the belief that there would be a wide trickle-down effect from economic stability overseas.
Suntech was also helped by published comments on Business Insider that the solar shop's CEO said that Suntech was still making profits, even after severing a long-term supply agreement with MEMC Electronic Materials. The claim refuted rumors of a possible bankruptcy for the company.
CAPS member cibient says the market depressed Suntech's stock by confusing it with the high-profile bankruptcy of a certain politically connected solar company.
Wow! Suntech is NOT Solyndra, Wall Street! Sure, I get that the macro global outlook is terrible, and oil prices are dropping. But so follows for raw materials. STP is well positioned to ride back up whenever energy is ready to make a move back up.
Add the solar specialist to your watchlist, and let us know on the Suntech Power CAPS page whether you think it will be able to rebound further.
Social security
After a subsidiary issued a digital certificate to an entity fraudulently claiming to be Google (Nasdaq: GOOG ) but that may have been connected to the Iranian government, which some believe used the opportunity to spy on its citizens' computer usage, VASCO Data Security was all but left for dead. DigiNotar ceased operations in the tumult afterwards and ultimately declared bankruptcy, as it's difficult to attract customers if they can't trust your security systems.
Yet the data-security parent surprised the market by reporting better-than-expected profits and lifting its guidance for the year. VASCO was burned by the episode, but DigiNotar's contribution to the overall revenue picture was minimal, and the company will take a hit of less than $5 million from the episode (not including any lawsuits that might arise).
As VASCO noted, its customers discerned the difference between its business and DigiNotar's, something the markets failed to do. Highly rated CAPS All-Star member sehawk99 says the real risk facing it is a lack of a deep competitive moat.
Yes, the services they offer are, or should be, in high demand. The problem is that VDSI has no real moat to speak of. In their industry, I view them as competent but not formidable. ... All in all, I'm thinking the stock has a reasonable shot at a 50% gain in the next year or two.
Tell us in the comments section below or on the VASCO Data Security CAPS page if you think an investment now is secure, and add it to your watchlist to watch its progress.
Walking the Cat-walk
After both Illinois Tool Works (NYSE: ITW ) and Manitowoc followed Caterpillar in reporting better-than-expected earnings, it should have come as little shock that fellow heavy-equipment operator Terex would follow suit with its own strong showing. It also pushed its guidance for the year 16% higher, which outstripped analyst estimates as well.
Terex finds itself in the enviable position of being able to raise prices while further reducing its costs, a situation that lends itself to higher margins down the road. It is also unique in that rental companies comprise its sales outlet rather than having a network of dealers to push product through. It was large rental companies placing big orders for its aerial work platforms that helped segment sales jump 59% in the quarter.
With almost 1,300 CAPS members weighing in on the equipment specialist, 97% of them think it will continue to outperform the broad market indexes. Add Terex to the Fool's free portfolio tracker if you'd like to rent a front-row seat to its future opportunities.
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