With Federal Reserve Chairman Ben Bernanke promising to continue "accommodative policies" to stoke economic coals, the market roared back to life yesterday. 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 why their stock surged. 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? The markets jumped 161 points or 1.2% yesterday, so stocks that went appreciably higher are pretty big deals. But let's see whether they're truly headed into orbit.
|
Stock |
CAPS Rating (out of 5) |
Monday's Change |
|---|---|---|
|
SIGA Technologies |
** | 29.3% |
|
Carrols Restaurant Group |
*** | 12.5% |
Setting sights on growth
There was no company-specific news that should have sent biotech SIGA Technologies higher yesterday, but with former partner PharmAthene also jumping 11% higher, maybe there's an announcement coming -- or investors hoping so.
The two have been locked in a long-running battle over the rights to smallpox antiviral drug ST-246, and the war has taken its toll on the shares of both companies. Even after yesterday's jump, SIGA is still down 71% from last year while PharmAthene has been cut in half.
SIGA was weighed down more heavily as questions arose over whether it used its political connections to be awarded a "sole source" contract for a drug of dubious necessity. The Los Angeles Times has reported that the U.S. already has a $1 billion stockpile of a smallpox vaccine it could inoculate the population with and treat people should they become exposed. As other scandals of alleged cronyism such as Solyndra emerge, the spotlight has remained on SIGA's relationships.
And without any real reason for the movement in its stock, it's hard to develop any enthusiasm that SIGA will be able to get out from behind the 8-ball. While 80% of the 243 CAPS members rating the biotech think it will outperform the broad indexes, the two-star rating they've assigned it suggests they think there are much better places for your money. I agree and am rating the biotech to underperform on CAPS.
Add SIGA to the Fool's free portfolio tracker and tell us in the comments section below or on the SIGA Technologies CAPS page whether you think the stock will head higher.
Where kids are king
With Wendy's
Already the largest franchiser in the U.S., Carrols needs to first complete the spinoff of its Fiesta chain -- which runs both Pollo Tropical and Taco Cabana, which competes against Chipotle Mexican Grill -- and refinance its credit facility. The spinoff has been in the works since early 2011 and should be completed sometime next month.
The franchiser has been a fairly low-profile operator despite its far-flung operations, no doubt in part because BK was taken private back in 2010. The purchase puts some 575 Burger King restaurants in total under its belt, and it will use the opportunity to remodel more than three-quarters of them, giving the chain a much-needed facelift. Ever since 3G Capital ran the show, Burger King's fortunes have waned. The introduction of a creepy, giant-headed mascot did nothing to help its image, and it recently killed that promo.
Carrols needs this injection, too. Fourth-quarter earnings missed expectations, coming in flat compared to profits of $0.12 per share a year ago. Last winter, CAPS member Monroe7 wondered why, when you have much better rivals to choose from -- let alone other big name options -- you'd pick Carrols as an investment:
High debt small cap with no dividend. At least they have earnings in the positive. Why would you buy this when you could get CVX, MCD, KO, and other stable companies that actually pay shareholders.
Take a seat at the Carrols Restaurant Group CAPS page and tell us if this acquisition is smart, then add it to your watchlist to see if it will pay off with additional growth.
Going into orbit
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