Lousy economic data plagued the Dow on Friday, sending the index tumbling 124 points, or 1%. The economy created only 80,000 jobs in June, which was well short of estimates. Compared with an upwardly revised 77,000 created the month before, the situation is stagnating.
Yet some companies managed to go in the other direction, some even rising higher by double-digit percentages. But resist the urge to high-five everyone in the cubicles next to you, 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.
CAPS Rating (out of 5)
|XOMA (Nasdaq: XOMA )||11%||$3.38||**|
|Novavax (Nasdaq: NVAX )||6.7%||$1.90||*|
On the up and up
Hiking and hunting boot maker LaCrosse Footwear took a hike after Japanese shoe salesman ABC Mart agreed to buy it for $137 million, or $20 per share in an all-cash deal. Analysts point to a stagnating market at home and a rising yen for the interest in Japanese companies looking overseas for investment opportunities. LaCrosse welcomes the buyout offer, as it's been struggling against rivals such as Wolverine Worldwide. It discontinued its work apparel line of business and saw lower military sales to the government. ABC will now get a chance to walk a mile in its shoes.
At least one company isn't wilting in the heat: Juice maker Jamba's shares jumped 10% on Friday -- and are up about 33% so far in July -- on speculation the heat wave gripping much of the country will spur sales of its refreshing drinks. According to NOAA, more than 3,000 temperature records were broken last week, including in the nation's capital, which was locked into temperatures of 95 degrees or better for more than nine straight days. While that is a spur to some immediate sales, it seems a tad fleeting to base an investment decision on -- autumn is coming, with winter on its heels. So, too, is the partnership with the U.S. Olympic swim team. I expect the stock to melt down to its former levels unless it comes up with something more fulfilling than higher temps.
Also enjoying an unwarranted bump in its price was biotech XOMA, as it announced that it began enrolling patients in late-stage trials for its drug gevokizumab, which treats eye inflammation that can lead to blindness. While it's notable to have made it through to the phase 3 trials, there's a long way to go yet before it can be declared a success, and though such milestones tend to cause such bounces, they can just as easily evaporate. Similarly, Nanosphere was moving higher on even less news, so what's easily gained can be just as easily lost.
Catching a cold
Vaccine maker Novavax also moved higher on positive trial news, but with its developments only in phase 1 testing, it's really too early to get excited about what's going on. But its stock has been moving sharply higher for several weeks now, and its stock is up about 50% over the past month, no doubt helped in part by reports that deaths associated with the swine flu scare a few years back may have been 15 times as high as previously thought. Novavax rose to the forefront during the pandemic outcry, though it didn't have a vaccine on the market.
Moreover, its clinical testing for the H1N1 virus ended as it rolled it into its seasonal virus program, but that's still in mid-stage trials. But new studies on the lethality of bird flu viruses also came out, and Novavax has vaccines targeting it, though they're also in early stages. It received a $179 million contract last year from Health & Human Services to develop vaccines for pandemic and seasonal viruses, and the heightened awareness of their deadly capabilities is bolstering its prospects as it started in May the second phase 1 trial for an H5N1 virus vaccine under the contract.
While three-quarters of the 310 CAPS members weighing in on Novavax think it will end up outperforming the broad market averages, with no products on the market and a long way to go to get one there, they've assigned it the lowest one-star rating, suggesting they think there are much better places for your money.
With the stock now swinging higher however, tell me in the comments section below or on the Novavax CAPS page how much higher you think it will fly, or whether investors would be casting pearls before swine by taking a stake here.
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