The 3 Stocks Beating the Market's Malaise

With the Dow falling by 128 points, or 1%, as the earnings season kicked off with weak results and disappointing guidance, there was little room for cheer in the markets. Yet some companies did manage to eke out a gain and are notable because of the effort.

Yet resist the urge to high-five everyone in the cubicles next to you, however. Smart investors won't celebrate until they know why their stock surged, because without a fundamental basis for the bounce, these stocks could just as quickly make the return trip down.

Company

Gain

Affymax (Nasdaq: AFFY  )

9.9%

Sirius XM Radio (Nasdaq: SIRI  )

4.6%

Vringo (NYSEMKT: VRNG  )

4.9%

Maximum overdrive
Lately it seems there just aren't any down days for biotech Affymax. The stock is up nearly 300% since the start of 2012 and has more than quintupled over the past year. With that kind of trajectory, there's been no time for looking back or looking down.

Yesterday was just more of the same as it got a boost from Lazard Capital issuing a positive note on the biotech. However, as its anemia drug Omontys builds up a head of steam to take on the venerable Epogen, the stakes get higher and the risk to its elevated stock valuation grows.

Over the past two and a half decades, Epogen has generated $40 billion in sales for Amgen (Nasdaq: AMGN  ) , with Johnson & Johnson (NYSE: JNJ  ) selling it under the name Procrit for treating anemia resulting from chronic kidney failure, chemotherapy, zidovudine treatment for HIV, or surgery. But after safety concerns suddenly arose, sales of Epogen fell 20% in 2011 to $2 billion. Omontys introduces a once-monthly treatment regimen, which compares favorably to Epogen's twice weekly schedule.

In July, I rated Affymax to outperform the market indexes on Motley Fool CAPS as a means of holding myself accountable to readers for the bullish sentiments I expressed about the stock at the time (hey, better late than never!). Omontys has a more patient-friendly regimen, a lower price, and the potential for more such partnerships such as those signed with Japan's Takeda Pharmaceuticals and Fresenius Medical Care's (NYSE: FMS  ) dialysis centers. The 180,000-member investor community translates informed opinion into stock ratings of one to five stars. Surprisingly, Affymax holds a rather lowly two-star rating despite the constant drumbeat of good news and opportunity, even though three-quarters of those weighing in on the biotech believe it will outperform the broad market averages.

While some of the doubt could be related to valuation, let me know in the comments box below if you think Affymax still has legs to run higher or if it stumbles. I mean, it can't keep up this pace forever, right?

Look to the heavens
As expected, Sirius XM did record higher subscriber growth, adding almost 446,000 subscribers in the third quarter, but what likely got investors excited was the extraterrestrial radio operator raising its forecast for 2012 subscriber gains to 1.8 million from prior guidance of 1.6 million. The better September auto industry sales report has put subscriber growth into overdrive  .

With a positive outlook heading into the Liberty Media (Nasdaq: LMCA  ) conference yesterday, investors in the media conglomerate can come away with a better feeling about their company taking over Sirius. Yet while it's another company I've rated highly on CAPS, I'd still recommend caution here.

Having recently bought a new Ford (NYSE: F  ) pickup truck, I was talking with my sales guy yesterday who said October is off to a horrible start. There are hardly any sales being made. He noted the dealership is one of the highest-volume sellers in the region, so he can only imagine how the others are handling it. While one anecdotal report by one dealership for one carmaker doesn't a trend make, it may turn out the month becomes a scary one for the auto industry, which could translate into lower subscriber growth for Sirius XM Radio.

I'm not changing my outperform rating on the satellite operator just yet, but tell me below if you believe I may be raising a yellow flag too early.

They see me trollin', they hatin'
Some call it a patent troll, and it's obvious video ringtone specialist Vringo is using its acquisition of search engine Lycos to its fullest advantage. It immediately launched a round of patent infringement lawsuits related to sorting ads based on click-throughs against Google (Nasdaq: GOOG  ) , Target (NYSE: TGT  ) , Gannett (NYSE: GCI  ) , and others, and thus far the court rulings have been going its way. It came out on top in a Markman hearing recently, which ironed out interpretations of various patent claims before a trial begins, and earlier this month a judge refused Google's request to dismiss the suit on grounds that earlier patents covered the same invention .

Since then, the stock has been on a roller-coaster ride, rising and falling by wide margins. Yesterday's gain, which occurred for no particular reason, followed an 18% drop the day before, also on no news. Vringo is up another 3% so far in early morning trading today and will undoubtedly be volatile until the lawsuits conclude.

Whoa, Nelly!
Despite being one of the market's biggest winners since bottoming out three years ago, there is still some healthy upside to be had if things go right for Sirius XM -- and plenty of room to fall if things don't. Read all about Sirius in our brand-new premium report. To get started, just click here now.

Rich Duprey has no positions in the stocks mentioned above. The Motley Fool owns shares of Ford, Google, and Johnson & Johnson. Motley Fool newsletter services recommend Ford, Google, and Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On October 12, 2012, at 11:08 AM, duze54 wrote:

    F is struggling in Oct. I just bought a 2013 Equinox with SYNC I love it-took all-everything when my 90 days are up 11/8. Real nice phone rep took care of it. CC willed be billed on 11/9 for $199.00 and get car, internet and mobile phone access for one yr. Vacation last month listened to 3 NFL games during Sunday drive to destination-never had any static all the way to FL from IL !! It was great.

  • Report this Comment On October 12, 2012, at 11:10 AM, duze54 wrote:

    Plus royalties $13.95--sorry 212.95 complete.

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