Why Did My Stock Just Die?

Since there seems to be some grudging agreement between House Speaker John Boehner and President Obama to implement tax hikes on the so-called rich, the Dow Jones Industrial Average was encouraged to once again end yesterday up over 100 points, its second straight day of gains.

Yet the biggest loser on the day was General Electric, which fell more than 1% after it reduced the guidance for its industrials segment. The three companies below, however, did much worse than the Dow or its lagging component, falling by double-digit percentages.

Company

% Change

Galena Biopharma (NASDAQ: GALE  )

(16%)

GT Advanced Technologies (NASDAQ: GTAT  )

(11.3%)

Smith & Wesson Holding (NASDAQ: SWHC  )

(10%)


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.

Hitting up the till
Biotech Galena Biopharma is in late-stage studies with its cancer therapy NeuVax, which trains an individual's immune system cells called T-cells to attack and kill those that exhibit the HER2 protein. Drug giant Roche, which licenses Herceptin from PDL Biopharma, has already proved that that particular protein is a site worthy of further investigation, and if Galena is successful in its efforts, investors are looking for it to break in on Roche's blockbuster territory.

Yet yesterday's fall didn't have anything to do with that, but rather with Galena tapping the equity markets with a stock and warrant offering that was priced at $1.60, some 14% below where it had been trading before it made the announcement.

Galena longs are a protective bunch who don't brook no gainsaying the stock. Two weeks ago, when I mentioned that The Street's Adam Feuerstein had cast aspersions on its ability to make it through the FDA gauntlet, they took to the comments section to attack the short thesis. I noted then that Galena may be cherry-picking the data as Feuerstein suggests, or it could be following where the science leads. That hasn't changed since then, but the offering also offers two possibilities: Management figures it better raise money while it can because things may go awry, or it's getting ready to fund the next stage of the course it set.

I know where certain Galena investors stand, now where do the others? Let me know in the comments section below.

Cloudy days ahead
A week or so ago, solar polysilicon equipment maker GT Advanced Technologies bounced higher after Jinko Solar (NYSE: JKS  ) announced it got a $1 billion handout from the Chinese government. I predicted the gains wouldn't stick, as the news had nothing to do with the equipment maker even if there would be some sort of trickle-down effect for polysi demand. And that came through yesterday after GT gave up dour guidance for the fourth quarter and next year.

It said it expects to lose as much as $0.10 per share next quarter, well below analyst forecasts of a $0.17-per-share profit, giving it full-year profits of $0.77 to $0.82 per share. Next year, though, things were going to get really bad, as it anticipated making at most $0.44 a share, but it could be even worse with just a quarter per share in profits.

I'd also said that Trina Solar (NYSE: TSL  ) would likely make the return trip, but thus far it's still pushed higher, rising 17% over the past five trading days. I still don't expect those gains to hold.

Gun makers in their sights
Last, the fallout from the tragedy in Connecticut last week continues to weigh on gun maker Smith & Wesson, which has seen its stock lose 30% of its value since it hit a 52-week high a week ago. Sturm, Ruger lost almost 8% yesterday.

Gun control legislation is on everyone's lips, whether for or against, and though momentum would seem to have shifted in favor of stricter laws, that's not so certain, and President Obama has only come out saying he'd support a reinstatement of the so-called assault weapons ban. That might not impact as many gun buyers as other forms of gun control, but with Dick's Sporting Goods (NYSE: DKS  )  pulling gun sales from its stores for the time being and Cerebus Capital Management saying it's booting Freedom Group -- the maker of Remington and Bushmaster guns -- from its portfolio, expect gun stocks to be depressed for some time.

 

Ready for a resurrection
For GE, the recent financial crisis struck a blow, but management took advantage of the market's dip to make strategic bets in energy. If you're a GE investor, you need to understand how these bets could drive this company to become the world's infrastructure leader. At the same time, you need to be aware of the threats to GE's portfolio. To help, we're offering comprehensive coverage for investors in a premium report on General Electric, in which our industrials analyst breaks down GE's multiple businesses. You'll find reasons to buy or sell GE, and you'll receive continuing updates as major events unfold during the year. To get started, click here now.


Read/Post Comments (4) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 19, 2012, at 4:29 PM, piem235 wrote:

    I am long on Galena (GALE) and with any new drug or process comes risk but also huge profits if it works. So I put my money where my mouth is and I will just stay the coarse till either profit or ruin.

  • Report this Comment On December 19, 2012, at 6:30 PM, revcoop wrote:

    I am long Gale. When I started investing I read Motley Fool daily I learn to trust certain authors. Adam F.s work is the work of an incompetent lazy writer. His thesis against Gale is two fold. One because they bought the drug cheap it can't have a great value. Two they cherry pick the Data. If you have enough time go to NeuVax on facebook and follow their lead. The researchers, who are scientists and doctors beyond reproach are people dedicated to wiping out cancer. Dr. Peoples is a West Point grad. He specifically addresses Adam's theory in an online interview. I am a person with a post graduate degree used to doing research. I own 35,000 shares of Gale. I know it is a risk. But I believe it is a sure winner.

  • Report this Comment On December 20, 2012, at 11:59 AM, Brian6203 wrote:

    I agree with revcoop, Adam's thesis revolves around the fact that it was acquired cheap and that they "cherry picked" data. Everyone knew they had to do financing, I didn't think it was a surprise. But in regards to cherry picking data, the company only saw a product that was more effective when treated on a specific patient population, and has explained in detail why this is the case. I think the Phase 3 trial willl have even better outcomes than the Phase 2 study, because all patients will be optimally dosed, all patients will receive booster shots, and because it will only include nodep patients. The study is designed for GALE to succeed

  • Report this Comment On January 27, 2013, at 5:08 PM, Popa17 wrote:

    Folks, What is the estimate timing for ending the phase III Gale trial ? Many thanks

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