Whoa! What Just Happened to My Stock?

The Dow Jones Industrial Average is bouncing around like a ping pong ball this week, racing ahead by triple-digit amounts only to fall by a like number the next day and then rise once again the day after. Yesterday the index rose by 99 points, just missing out on a fourth consecutive trading day of triple-digit moves, though it was still emboldened by computer maker Dell's (UNKNOWN: DELL.DL  ) decision to go private.

While the $24 billion buyout might be great news for its investors, the three stocks below had their own reasons to celebrate.

Company

% Gain

Keryx Biopharmaceuticals (NASDAQ: KERX  )

8.5%

USANA Health Sciences (NYSE: USNA  )

7.9%

Power-One (UNKNOWN: PWER.DL.DL  )

7.4%

Now resist the urge to high-five everyone in the cubicles next to you. 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.

An exclusive arrangement
Drug developer Keryx Biopharmaceuticals bounced higher yesterday as investors shrugged off analyst questions about whether its treatment for patients with end-stage renal disease who suffer from high serum phosphorus levels would have the five-year window of exclusivity management is seeking.

The stock soared last week after reporting that late-stage trials for Zerenex met both primary and secondary endpoints, helping it recover from the losses experienced by the failure of perifosine. But then it gave up more than 20% of those gains as management sought to capitalize on the new higher price by tapping the equity markets with a dilutive share offering, as well as the questions raised about the drug's status.

A follow-up article on Seeking Alpha, however, suggests those doubts are misplaced and the lower price the analyst report engendered gives investors a chance to get in at a better level than they otherwise would have.  It argues that the drug is novel enough to pass muster, but as biotech investors are well aware, the FDA often keeps you on your toes over how it will rule. If there's one thing investors can be sure of, it's that their stock will be volatile until a final decision is handed down.

The pressure's on
USANA Health Sciences is getting tarred with the broad brush being used by hedge fund operators to paint multi-level marketing peer Herbalife (NYSE: HLF  ) as a scam. The back-and-forth battle between Bill Ackman, Daniel Loeb, and Carl Icahn has brought down all similarly situated MLMs including USANA, while an erroneous report in the New York Post that a law enforcement probe had been launched against the supplements maker also caused their stocks to hiccup.

It's often said living well is the best revenge and USANA helped its own cause yesterday reporting fourth quarter sales surged 15.5% to $168.5 million leading to a 40% improvement in profits from the year ago period . That came in ahead of analyst expectations and marked a record performance for the MLM, which saw business expand in all its regions but particularly in the Asia Pacific markets where sales jumped 21%. China figures to be a big component of USANA's future growth strategies.

With full-year guidance of $700 million to $720 million in sales also well above analyst forecasts, USANA seems willing to let its operations do the talking for it and to let the hedge funds sling all the mud they want at one another.

Say no more
Solar power inverter manufacturer Power-One also recently reported fourth-quarter earnings, but they weren't nearly as robust as those that USANA posted. It said revenues rose 2.1% as it shipped 628 megawatts of inverters in the quarter, but that was lower than it initially expected because of weakness in Germany and Italy, which led to a 32% sequential decline in European sales .

Still it gave Power-One 3.6 gigawatts of inverters shipped over the course of 2012, a 23% increase, but that only generated a 6.6% pop in full-year renewable energy revenues. Pricing pressures remain a concern as it also weighs on operating margins, which tumbled from 17% in 2011 to 10.6% last year.  Power-One says it will be adjusting its production to meet lower demand levels and that will entail an 8% reduction in its workforce .

Even with a partnership unveiled yesterday with Panasonic to develop and manufacture stationary power energy storage systems in Japan based on Power-One inverters and Panasonic lithium-ion battery cells (and undoubtedly the reason behind its move higher yesterday), I still view the alt energy industry as broken, one that can only survive (let alone thrive) so long as it receives pricey subsidies. For that reason I've had a long-running underperform rating on Power-One on Motley Fool CAPS, but tell me in the comments box below if you think there's a reason to believe 2013 won't be just more of the same.

Whoa, Nelly!
The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock it is in our brand-new free report: "The Motley Fool's Top Stock for 2013." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this under-the-radar company.

 


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