3 Stocks the Dow Pushed Over the Cliff

House Speaker John Boehner's willingness to agree to tax increases without a similar commitment from President Obama to cut spending helped push the Dow Jones Industrial Average (DJINDICES: ^DJI  ) up more than 100 points yesterday, snapping a three-day losing streak.

Yet the biggest loser on the day was Hewlett-Packard (NYSE: HPQ  ) , which fell more than 3% after an analyst splashed cold water on speculation that its woeful performance would lead it to spin off its computer and printer division, saying it still needs the cash the division generates. The three following companies fell even harder than HP, some by even double-digit percentages.

Company

Change

Clearwire (UNKNOWN: CLWR.DL  )

(13.6%)

First Majestic Silver (NYSE: AG  )

(10.2%)

Celsion (NASDAQ: CLSN  )

(7.4%)

Now, don't go running over the cliff with them like a bunch of lemmings: It could just be a temporary situation. Let's first see whether they had good reason to fall, as panic-fueled routs can sometimes lead to excellent buying opportunities.

Clearly a lost cause
Shares of Clearwire sank below Sprint Nextel's (NYSE: S  ) buyout offer of $2.97 a share, as investors seemed reconciled to the fact they wouldn't be getting any more money out of the carrier -- or anyone else.

Minority shareholders contend that the original $2.90-a-share offer was too low, and the upgraded one wasn't any better. More like $5 a share would be reasonable, but other shareholders like Intel (NASDAQ: INTC  ) and Comcast (NASDAQ: CMCSA  ) representing 13% of outstanding shares have signed off on the deal.

Further pushing the deal in Sprint's direction was the agreement to provide $800 million in additional financing that would be exchangeable for Clearwire stock at $1.50 per share, serving to dilute minority interests further.

While it's not near what some investors wanted, the current price is 250% above the level it traded at in the middle of summer, so they've at least recovered some of their losses.

Hook, line, and sinker
Where Clearwire was falling because it wasn't getting enough money, shares of First Majestic Silver tumbled because it was paying too much. The silver miner agreed to buy Orko Silver for $2.72 Canadian, a 69% premium to its closing price on Friday. 

First Majestic says it's getting a huge opportunity in the La Preciosa project, one of the world's largest undeveloped primary silver resources, particularly since its development timeline coincides with its own organic growth strategy. While the market wasn't buying it, the Fool's silver guru, Chris Barker, declares it's a "huge win" for shareholders on both sides of the trade. He thought Orko was a top stock for the year, and while it took almost the full year to pan out, particularly after Pan American Silver (NASDAQ: PAAS  ) backed out of La Preciosa, it seems First Majestic saw the value inherent in the project.

Gambling with its future
Biotech Celsion has been turning up the heat on beating cancer by using heat-sensitive nanoparticles to deliver a hot "payload" of drug within tumors. Then when the heat's turned up with radio frequency ablation, the drugs are activated, and the tumor is killed from within. At least that's the theory it's trying to prove to the FDA, and results from its phase 3 HEAT trial are scheduled for next month. The company believes its proprietary liver cancer drug ThermoDox could be a $1 billion blockbuster opportunity and has already received authorization from European regulators to submit a marketing plan based on prior results. It's also been given orphan drug status here and abroad.

Not everyone is so enamored of the treatment, and TheStreet's Adam Feuerstein, known for sticking a pin in many a biotech balloon, says there are shorts who have intriguing arguments that Celsion will fail in its quest for progression-free survival study and suggests investors may want to sell their stock before that day arrives.

I noted previously there are many uses for thermal ablation such as Boston Scientific's (NYSE: BSX  ) hydrothermal ablation therapy to treat premenopausal women with menorrhagia, Covidien (NYSE: COV  ) using it to treat liver lesions, and C.R. Bard (NYSE: BCR  ) treating a number of conditions with its equipment.

I still think Celsion looks promising, but let me know in the comments section whether you think it's still a good idea to get out early.

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  • Report this Comment On December 19, 2012, at 1:48 AM, haywoodjadome wrote:

    Actually, the arguments are not intriguing at all. RFA alone recurs at a rate of 84% while resection recurs at a rate of 52%. If distant mets are the problem as the short hedge fund manager argued, then why does resection occur much more less than resection?

  • Report this Comment On December 19, 2012, at 9:33 AM, jduffee wrote:

    As a physician, I've watched the progress of heat-sensitive liposomes from animal trials at Duke through early human trials and now a maturing therapy with multiple targets. I've held Celsion stock since 1999 while adding and subtracting a bit on the way, my principle holdings have remained. I am convinced that the data are strong enough to await the unveiling of the results of the Phase II/II trial, so I'm not selling any. Keep in mind that the medication encapsulated is approved and used routinely; we are really talking about a delivery system that concentrates the salutory effects while minimizing the collateral damage to healthy tissue (in the case of doxy, the heart).

    More importantly, as a son, father, cousin and caretaker of persons who have suffered with a variety of cancers, I choose to invest in companies that might produce life-giving results. I am aware of the financial risks but the potential humanitarian benefits are much more convincing.

  • Report this Comment On December 20, 2012, at 3:48 PM, foolgabby wrote:

    Dr. J. ~

    From your computer to Gods ears. I like the way you think.

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