Stocks Avoiding the Doom and Gloom of Europe

When it rains it pours, and the eurozone is in the middle of a soaking. Spain formally requested a bailout, standing in line behind Greece, Ireland, and Portugal as countries that can be deemed financial basket cases. And Cyprus decided to join in the giveaway, too, making it the fifth sovereign to seek aid and adding to the woes already besetting the continent. With Germany standing athwart the ruins, the Dow Jones Industrial Average tumbled 138 points, or 1.1%, on Monday.

Yet some companies managed to buck the trend of a falling market and actually jumped higher by double-digit rates. Resist the urge to high-five everyone in the cubicles next to you, though, since 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.

Company

% Change

Price

CAPS Rating (out of 5)

Amyris (Nasdaq: AMRS  ) 20.7% $3.97 **
Horizon Pharma (Nasdaq: HZNP  ) 18.0% $6.22 ***
Alimera Sciences (Nasdaq: ALIM  ) 15.9% $3.21 **
Celsion (Nasdaq: CLSN  ) 11.8% $3.13 ****
Fushi Copperweld (Nasdaq: FSIN  ) 11.3% $7.49 *

When no news is good news
There was no company-specific news to account for the surge in alternative-fuels maker Amyris, but the highly shorted stock -- almost 27% of its float is sold short -- headlined an article on Friday by the market researchers at Kapitall, who were looking at the alt-fuel space after Virgin Airlines made positive comments about reducing its industry's carbon footprint through the use of biofuels. Amyris converts plant sugars into hydrocarbon molecules that can then be used to manufacture biofuels. So the positive coverage could cause short sellers to start covering their positions and drive the price higher.

Drug developer Horizon Pharma also got a boost for no reason, though last week it did sign an agreement with Covidien to promote a new drug, Duexis, that's aimed at relieving rheumatoid arthritis and osteoarthritis. It's also heading into an FDA review of its PDUFA of Rayos, a time-release formulation of low-dose Prednisone for treating rheumatoid arthritis, at the end of July.

Another drugmaker on the move based on nothing more than a whim is Alimera Sciences, though on Friday it was actually removed from the Russell 3000 and Russell Global indexes. Typically a stock will run higher when it's added to an index, because all the mutual funds tracking the index have to buy shares. Conversely, when it's removed, the theory is that it should fall since those same funds will be selling. Apparently, Alimera is running counter to the conventional wisdom. Investors still hope it will be able to partner with or be bought out by a larger pharma based on the European approval it received a few months back for its diabetic macular edema therapy, Iluvien.

At least one biotech had a reason to rise, as Celsion saw a lot of bullish call options traded yesterday, which came after the company's CEO said its liver cancer drug ThermoDox could be a blockbuster drug with $1 billion in sales. The stock has surged almost 60% over the past month and is up 46% in the past week alone. Last month, CAPS member Kdhard1 anticipated that the stock would take off as it "is in Phase III of their clinical trial for treatment for liver cancer and Phase II for breast cancer." With results of the testing due out possibly later this year, he expected the market to recognize Celsion's potential.

An ironclad opportunity?
And our one company that's not a biotech or a pharma, Fushi Copperweld, which makes copper-clad bimetallic products for telecoms and utilities, was also a no-news winner. Not much has changed at the metals maker since last month's earnings report that saw revenues drop 6% but profits fall by 28%. Its chairman and CEO still wants to take Fushi private, as first announced back in December, joining a growing list of Chinese companies that want to abandon the public markets after coming under greater scrutiny.

The short-selling shop Muddy Waters put Fushi in the spotlight in April, mentioning it in a larger report on how Chinese frauds are put together, although no direct accusation was made about the company. The stock closed up on the day, after management countered the Muddy Waters claims. Still, the glare of the klieg lights is apparently too much for many Chinese companies, and with China's economy landing a lot harder than many analysts anticipated, the spotlight will only get worse as such companies fail to live up to expectations.

Fushi Copperweld isn't an investor favorite on CAPS, where All-Star members rating it to underperform the broad market indexes outnumber their bullish counterparts.

But you can tell me in the comments section below or on the Fushi Copperweld CAPS page whether you think yesterday's run-up is a prelude to the having the going-private deal go through.

Going into orbit
Financial news may move stocks big and small, and even Warren Buffett has a stake in some of the largest. If you'd like to know why he keeps his ear to the ground there, check out the Fool's free report, "The Stocks Only the Smartest Investors Are Buying," and discover the one banking stock Buffett would buy if he were a smaller investor. Download your free copy today -- but hurry! It's for a limited time only.

Fool contributor Rich Duprey holds no position in any company mentioned. Check out his holdings and a short bioMotley Fool newsletter services have recommended buying shares of Covidien. 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.


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  • Report this Comment On June 28, 2012, at 7:29 AM, biotechplayer333 wrote:

    Missed NAVB. Up 37% in the past month. It's beginning the PDUFA run to September 10 FDA decision. FYI

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