It was another down day for the Dow yesterday, its sixth straight losing session, though it could have been worse, as it tried to stage a late-day rally on hopes of a new round of quantitative easing. Yet over that six-day time span, the index lost 331 points, or 2.5% of its value.
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, 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.
Yesterday's % Change
CAPS Rating (out of 5)
|Verifone (NYSE: PAY )||10.9%||$35.41||**|
|Zhongpin (Nasdaq: HOGS )||7.5%||$10.75||***|
|Mitek Systems (Nasdaq: MITK )||7.1%||$4.05||**|
|Enerplus (NYSE: ERF )||6.9%||$13.11||****|
|Solazyme (Nasdaq: SZYM )||6.9%||$11.74||****|
On the up and up
Credit card terminal maker Verifone climbed higher levels yesterday after winning a contract with Washington, D.C. to have its systems installed in 6,500 city taxis. The $35 million contract is spread over five years, so this alone does not account for the price change. What juiced the return was the CEO making a $5 million market purchase of company share, putting his own money on the line just like regular investors. While it was done according to a preplanned trade -- 10b5-1 plans let insiders buy and sell stock on a regular schedule regardless of material information they may hold -- it still represents a vote of confidence for his company, which has lost more than a third of its value over the past few months.
Pig in a poke
With China being the world's largest producer and consumer of pork, pork processor Zhongpin should be bringing home the bacon, but instead has been troubled by falling prices for its products. There was no company-specific news driving shares higher, though there was some heavy options activity that equated to a bullish sentiment. I'll admit to being skeptical about its investment quality, having questioned its claims of better profitability because it uses an "industrial cluster approach" to farming, while others have suggested it overstates the number of hogs it buys and have doubted its distribution channel. Some poor corporate governance practices also hang over it. Even with an offer to go private on the table, I probably wouldn't step into this sty.
There was also nothing to account for Mitek Systems' move higher, but I'll admit to be wowed by the remote deposit technology it pushes. Making bank deposits with your smartphone is a neat bit of technology, but Mitek has suffered from some of its banking customers failing to renew their contracts with them. With JPMorgan Chase, US Bancorp, and Capital One Financial among its top-tier clientele, the loss of any of them would be critical. While there was an article on Seeking Alpha the day before identifying it as a top takeover candidate, it was just pure speculation based on the hope that Mitek was in the right place at the right time in the mobile payments market. Mitek has lost 70% of its value on its poor earnings report and it will need to show it can keep its customers around before the market will buy in to the story.
A mass of gains
Well, I'm sure it wasn't the write-up of Solazyme by my Foolish colleague Alex Planes the other day that accounted for its bucking the market's trend yesterday, since it wasn't the glowing endorsement so many investors seek. It was likely just riding higher on the 19% bounce industry peer Amyris enjoyed (KiOR was also up 6.6%, both on no news). While I concur with the bears that biofuels as a sustainable alternative energy source is something akin to pie-in-the-sky wishful thinking, as Alex pointed out there are several Foolish analysts who have put real money behind the stock, believing it can surmount the long odds. My underperform rating on CAPS for Solazyme is just eking out a gain at the moment, but I plan on leaving it in place as the company's reliance upon taxpayer subsidies for sustenance will eventually doom it.
Catching a cold
At least there was a catalyst for independent Canadian oil and gas outfit Enerplus Resources to bounce higher yesterday, as an analyst at Credit Suisse upgraded it to outperform. Of course, I don't place much faith in the buy-sell-hold games analysts play (how are they able to rate a company a "hold" after they previously told you to "sell"?), but such pronouncements can cause a stock to move. So can the heat wave that still holds the country in its grip as people flip on the AC and utilities produce more electricity. Canadian natural gas in particular rose as a result of the combination, which one analyst pegged to rising demand, improving storage logistics, and a reduction in the number of rigs drilling.
Enerplus has potentially lucrative assets in Canada's oil sands, as well as the important Bakken and Marcellus shale formations in the United States. It was the ailing natural gas market with its historically depressed pricing that caused the driller to slash its dividend in half just two weeks after it announced it was paying the dividend in the first place.
I've rated Enerplus to underperform the market on CAPS because I'm not sure the industry has gained control of the wheel, or that it really can yet (hot weather or not). Yet the CAPS community doesn't hold the same negative feelings that I have, as 731 members have weighed in on the inverter maker and 97% of them think it's going to outstrip the performance of the broad indexes -- just as it did yesterday.
With the stock now swinging higher however, tell me in the comments section below or on the Enerplus CAPS page how much higher it will fly, or whether investors will get burnt betting on a comeback.
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- Add Enerplus Resources to your Watchlist.
- Add Solazyme to your Watchlist.
- Add Zhongpin to your Watchlist.
- Add Mitek Systems to your Watchlist.
- Add Verifone to your Watchlist.