The Dow Finally Has Something to be Thankful For

A holiday-shortened week has the Dow Jones Industrial Average (INDEX: ^DJI  ) basically unchanged, though since the presidential election it's down more than 400 points, or 3%.

Coal stocks remain one of the worst performing sectors this week with Alpha Natural Resources (NYSE: ANR  ) down 12%, and Arch Coal (NYSE: ACI  )  and Peabody Energy (NYSE: BTU  )  down between 1% and 2%. While James River Coal (Nasdaq: JRCC  ) is actually trading higher, coal and iron ore miner Cliffs Natural Resources (NYSE: CLF  ) fell hard after cutting its planned production, dropping off the cliff by 12%.

At the other end of the spectrum were the homebuilders, with Hovnanian (NYSE: HOV  ) rising 15% and closing in once again on its 52-week high hit just a few weeks ago, and Pulte Homes (NYSE: PHM  ) up 7% as the Commerce Department reported October homes starts were up compared to analyst expectations for a drop.

Not so dynamite
Yet over the last five trading days, some stocks managed to do even worse than the indexes or the coal sector, some falling by steep, double-digit percentages. Drug developer Dynavax Technologies (Nasdaq: DVAX  ) tumbled 37% over the past week -- 52% last Friday alone -- after an FDA panel issued a split decision on its hepatitis-B vaccine Hepislav, but one heavily weighted toward its not getting approved.

As Dynavax's clinical trials showed, Hepsilav was found effective, which is why it voted 13-1 to approve the vaccine, it's just the panel couldn't say the same about its safety. The Vaccines and Related Biological Products Advisory Committee voted 8-5 there was insufficient data to support a favorable determination regarding safety. That will likely kill its chances for approval when it comes before the full FDA in February and was why the stock was pummeled.

Dynavax will likely have to go back and perform a long-term, late-stage safety study on Hepislav that could drag an approval out for a year or more. Considering how much cash the biotech is burning through, it becomes a worrisome problem for its survival, or at least for the continued testing of its pipeline of drug candidates like the asthma treatment being funded by AstraZeneca (NYSE: AZN  ) .

The global market for hepatitis B drugs was about $3.1 billion in 2011, and is estimated to hit $4.4 billion by 2019, a 4.8% compounded annual growth rate, markedly slower than the 8.6% rate realized over the last five years. The reason for the slowdown, however, has been the rise in vaccinations.

Since 1982, the CDC has recommended that all adults and children be vaccinated, and between 1990 and 2009, the number of new infections dropped 90% in children and by 75% in other age groups. Even so, 38,000 people were infected with hepatitis B and some 2,000 to 4,000 people will die from it every year.

So even though Dynavax's product would offer compelling efficacy that might allow it challenge GlaxoSmithKline (NYSE: GSK  ) and Merck (NYSE: MRK  ) , which dominate the hep B market, the biotech's chances for seeing it through look slimmer.

I previously rated the biotech to outperform the broad market indexes on Motley Fool CAPS, the 180,000 member-driven investor community that translates informed opinion into stock ratings of one to five stars. I had bet the efficacy data would be enough to carry the day, but without a positive safety profile and the company burning through cash, I think its prospects are bleak. Hepsilav may gain approval, but can Dynavax survive that long? Let me know in the comments box below if the biotech will see it through to a successful conclusion

A short story
Unlike Research in Motion (Nasdaq: RIMM  ) , which has to wait till sometime in January for its new BlackBerry 10 operating system to hit the shelves with new smartphones, Nokia (NYSE: NOK  ) is already there in time for the holiday shopping season and early reports are the Lumia 920 are proving popular. There were reports that some stores had sold out their allotments in Germany.

With the stock heavily shorted as its short interest rose some 6% in the most recent period, analysts suspect there was a lot of hedge funds covering their positions which drove the stock up 24% last week, half that occurring on Wednesday alone.

While RIM adherents would say it's better the BlackBerry maker get its new product right rather than early, it's hard to argue that the smartphone specialist missed a big opportunity to gain ground by having its new OS and phones on the market in time for the holidays. Apple (Nasdaq: AAPL  ) , Samsung, and yes, Nokia, are all pushing the hardware and it will be tough for consumers to sit idly by biding their time until BB10 is released. Nokia can at least justify its decision to hookup with Microsoft's (Nasdaq: MSFT  ) Windows 8 OS

Of course, I'm bearish on both RIM and Nokia and a short squeeze rally doesn't change my opinion of the Finnish smartphone maker or that it will be an also ran in the market, barely hanging on by its fingertips. It's just one of the reasons I'm maintaining my underperform rating of Nokia on CAPS, but you can tell me in the comments box below whether you think it will be able to outmaneuver its rivals and if it can keep selling enough Lumia's to make a difference.

Stop, look, listen
There is absolutely no argument that Apple is at the center of technology's largest revolution ever, and that longtime shareholders have been handsomely rewarded with over 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and more importantly, your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.


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  • Report this Comment On November 23, 2012, at 2:44 PM, fatmiks wrote:

    The biggest buyers of this stock last quarter were the big boys: goldman sachs and other big funds bought in million share increments. do they know something we don't?

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