2 Stocks Stopping the Presses

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:

Stock

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.

Coming unplugged
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.

Read all about it!
Both of these stocks made a lot of noise this week, but if they carry too much risk for you, The Motley Fool has found one stock with so much promise that we've dubbed it "The Motley Fool's Top Stock for 2012." This-up-and coming multibagger is highlighted in a free report that discusses how it's revolutionizing commerce in Latin America. You can get instant access to the name of this company by downloading it now.

Fool contributor Rich Duprey owns shares of Pfizer, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Solazyme. Motley Fool newsletter services have recommended buying shares of Pfizer and General Motors. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (6) | Recommend This Article (4)

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 May 03, 2012, at 6:21 PM, seattle1115 wrote:

    Didn't GM restart production of the Volt ahead of schedule due to an unexpected bump in demand?

  • Report this Comment On May 03, 2012, at 7:57 PM, buffalonate wrote:

    I believe A123 will eventually get bought out by General Electric. They have great technology but can they get the costs of their products down enough to be viable on a large scale? I doubt it. They have 2 or 3 years worth of cash left and their product is about 5 years away from getting the cost down to where it needs to be. The electric car battery industry brought the costs of their batteries down 14% this year so at least the industry is headed in the right direction.

  • Report this Comment On May 03, 2012, at 8:32 PM, capitalgorilla wrote:

    It strikes me how news get blown out of proportion:

    You may want to re-check the below facts:

    On the positive:

    1) A123's Military success is based on financial viability of the battery to replace the standard 6T battery and eliminate weight (speak fly a MIL-grade lead-acid-battery to middle east) , longer life, longer silent-operation of the vehicle and more.

    2) Electric cars may not have made a big bang due to the cost and more, but Micro-hybrids seem to give real real bang-for the buck. See details of BMW's active-Hybrids focusing on energy savings via stop-start, brake-regeneration and more.

    Finesse of viable technology , not brute force of a big motor and battery is the word here.

    3-Overblown bad press:

    1) The "exploded battery" at GM was not a battery, but the gases that leaked when the battery was severely overloaded and apparently something ignited it. It was also an experimental battery. I'd rather wait for official comment from A123 and GM rather than "presume guilt". If you squeeze your (open) gas tank too hard and smoke , what happens? Let's wait for real news.

    2) There was only 1 Chevy Volt fire. It strikes me how many blogs turn the 1 fire of a extreme-crash test vehicle into "fires" and "accidents" as if the car combusts spontaneously easier than a chain-smoker puffing away while pumping at a gas station. The volt was fixed and is in production again.

    3) The Fisker consumer reports "meltdown" was only a shutdown to prevent failure. It was fixed with a software fix per Fisker.

    4) The "massive" recall is big AND costly, but an example of integrity to recall all batteries with a potential small % risk of shortened lifespan.

    Ultimately, though A123 is burning cash fast and is running out of time to ramp up production to reduce cost which I don't see as being 5 years away. 2014-2015 is the mark A123 seems to eye for full capacity production and lower cost having already re-designed cells to space-efficient prismatic cells.

    Still someone may buy them but I doubt investments will be eliminated as their technology is too good, too valuable for GM, GE, BAE and BMW and more to evaporate.

  • Report this Comment On May 03, 2012, at 10:56 PM, lanceim59 wrote:

    This article is just full of incorrect information. By 2014, Solazyme will be producing biofuel oil for less than the current market price of petroleum oil. That's only one section of their algae-based products. The other sectors are nutritional and skin-care products. Solazyme's patent technology using sugar to excelerate the growth of algae to make oils is the key to thrie success in a trillion dollar industry.

    This author should do some research before writing this garbage of an article.

  • Report this Comment On May 04, 2012, at 4:30 PM, wipster56 wrote:

    Thanks CapitalGorilla and lanceim59 for taking the words out of my mouth and correcting this example of "overblown press." I thought the Fools had more intregrity than to allow baldface lies like this to be published under their name.

    Makes me wonder how much oil stock he's got... but more than that, why can't the oil companies see the handwriting on the wall and get on board the electric train rather than trying to derail it? Doesn't make good business sense to me... oh frack it all!

  • Report this Comment On May 06, 2012, at 6:03 AM, Cosmonailbuck wrote:

    Aone 123 --is the best bet for your money, i have been follow since the IPO. The stock is so under value, therefore I long the stock. I envision A123 management will turn it around.

    Buy it while is still low. Taget number is $8:90.

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