You saw the headlines. You know your stock price made a big move. But what does that portend for your investment's future?
By pairing the latest news with the collective wisdom of our 180,000-strong Motley Fool CAPS investing community, we might be able to discover whether your stock's latest exploits are a short-term hiccup -- or the start of a much bigger trend.
These two stocks both made big moves over the past five trading days -- one up, one down:
CAPS Rating (out of 5)
Change Past Week
|Savient Pharmaceuticals (Nasdaq: SVNT )||***||(34.2%)|
|A123 Systems (Nasdaq: AONE )||**||34.1%|
Source: Motley Fool CAPS, % change from April 12 to April 19.
72 inches down
When your biggest creditor calls you a bum and says your management team is essentially out to line its own pockets, you can be sure your stock is going to take a hit. So it was with gout treatment maker Savient Pharmaceuticals, which saw its stock fall by 34% over the past week as debtholder Tang Capital Partners, which owns some $39 million worth of debt, accused the biotech of being insolvent and asked a judge to appoint a receiver. Tang wants the judge to prevent any financing deal to be enjoined as well as prohibiting any bonuses from being paid to management. Oh, and it's also seeking $100 million in damages.
Gout might be the disease of kings, but treating it has delivered anything but a princely outcome for the drugmaker. After a rocky road to market, Savient launched Krystexxa last year amid high hopes, but sales did not get a royal welcome, and as the hedge fund implies, it badly misjudged the market for its medicine. Savient generated less than $10 million in revenues last year, 65% of which was related to Krystexxa.
The lackluster performance could make it difficult for Savient to sell itself. It had tried to do that one time before, with thoughts that Pfizer or Bristol-Myers Squibb (NYSE: BMY ) might bite. With disappointing sales and its biggest debtholder pulling a Marie Antoinette, Savient seems to be in trouble and could, as CAPS All-Star rwpaules suggests, be sent to the guillotine.
While Savient naturally disputes the contention, tell us in the comments section below or on the Savient Pharmaceuticals CAPS page whether you think the drama spells the end of the biotech, and then add the stock to your Watchlist to see whether it can fend off the reign of terror.
Consumers have proved that they really don't want electric vehicles yet. They're unproven, they carry a high price tag, and their reliability and safety are still a big unknown. So it sounds like a perfect situation for the government to throw more money into, and it was reported that the U.S. Army introduced a prototype vehicle using its battery technology that sent A123 Systems soaring.
CAPS member iheartweimers recently took me to task for saying the battery maker was doomed to bankruptcy and for focusing only on the consumer angle while ignoring A123's military contracts and storage systems for wind and solar projects.
I admit it will likely get some mileage out of the military, but like the expensive biomass fuels from Solazyme (Nasdaq: SZYM ) the Navy is testing, I'm not convinced it is a program that will survive amid mandatory budget cuts -- which will leave the consumer market as its one outlet for growth, which isn't saying much.
General Motors' (NYSE: GM ) Volt is on production hiatus because of bad press (if you buy into management's argument), and while A123 has a contract to supply batteries for the Chevy Spark, yet another problem with its batteries -- one exploded during testing, sending a GM employee to the hospital -- builds on the black eye the EV batteries carry. Fisker had a high-profile meltdown of one of its batteries during a Consumer Reports test, leading A123 to issue a massive recall, and fires in Chevy Volts brought on by accidents were traced to batteries made by LG Chem.
While A123 has some strong partnerships still in place, I'll be maintaining my underperform rating on CAPS until its eventual demise. Its bounce this week isn't indicative of any sort of momentum that it can maintain, but feel free to excoriate me in the comments section below for my extreme bearishness, and add the battery maker to the Fool's free portfolio tracker to see whether it flames out or is just getting ready to charge forward.
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