Whoa! What Just Happened to My Stock?

The Dow Jones Industrial Average ended last week on a high note, closing up almost 50 points, but that put it at about the same spot where it ended the week before, though slightly below the 14,000-point threshold this time. Based on encouraging trade news for the U.S. and China that saw our trade deficit fall from $48 billion last year to $38 billion in December suggests it's moving in the right direction even if the imbalance is still huge.

While that could lead to an upward revision in the GDP numbers recently released that showed a 0.1% contraction in the fourth quarter, the three stocks below had their own reasons to celebrate.

Company

% Gain

Oncolytics Biotech (NASDAQ: ONCY  )

21.9%

Zynga (NASDAQ: ZNGA  )

11%

MannKind (NASDAQ: MNKD  )

10.1%

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.

Realizing the potential in Reolysin
Cancer fighter Oncolytics Biotech surged Friday after reporting some stellar results from a small clinical trial it ran on lung cancer patients whose disease had metastasized or returned after getting previous treatments. In 19 of the 20 patients treated in the mid-stage study, their cancerous tumors were smaller six weeks later.

Oncolytics uses a proprietary version of the respiratory enteric orphan virus, or reovirus (which is essentially the common cold) to kill cancer cells. By the time you become an adult your body has built up protections against the virus so introducing it into the body leaves healthy cells unaffected . But scientists have discovered that cancer tumors exhibiting a certain mutation aren't protected from it, and when the virus enters into the cells, it multiplies and ultimately kills the tumor.

It's an exciting area of study that has the potential for widespread use because by leaving normal, healthy cells alone there may be fewer side effects for patients. There's still a long way to go before Oncolytics' Reolysin is approved, but the early look is certainly encouraging.

Coming up craps
Social gaming specialist Zynga is still riding high from its better-than-expected quarterly numbers showing a penny per share profit where Wall Street had been anticipating a $0.03 a share loss. Revenues might have been flat compared to the year-ago period, but it was still 24% better than analyst expectations.

As I've noted in my critiques of similarly situated Glu Mobile, the free-to-play/pay-to-play-more model is not a particularly winning one. The "freemium" model relies upon a very small number of players to actually pay up for the additional goodies, and the Fool's tech analyst Andrew Tonner estimates it's just 1%-2% of a company's user base. That could be why Zynga is moving into online gambling.

With a partnership with Bwin.party expected to launch later this year, investors are tempted to let the chips fall where they may, but going up against major sites like PokerStars is going to mean putting on your game face. The U.S. is broadly off limits to online gambling at the moment, except in Nevada where it's legal to gamble only for players who are physically in the state. Major casino operators like Caesars Entertainment have been approved to operate their own gambling sites, and there are more than a dozen other operators also licensed to operate as well. This is little more than an all-in gamble on Zynga's part to resuscitate what is otherwise a dwindling business, and I'd bet against it succeeding.

Say no more
Speaking of all-in bets, MannKind's stock jumped on no real company-specific news on Friday other than we can expect it to report earnings today after the markets close. The biotech has it all riding on inhaled-insulin therapy Afrezza that's in phase 3 trials to treat type 1 and 2 diabetes, and it's a race to see whether it makes it to the finish line before it runs out of cash.

If nothing else, company founder Alfred Mann continues to voice his opinion with his wallet, buying shares in the open market and most recently through a purchase agreement for $103 million worth of stock. Analysts are looking for MannKind to post losses of $0.18 a share this quarter compared to $0.30 a year ago, but let me know in the comments box below whether you think the market will continue to be kind to MannKind.

The future of MannKind?
Will MannKind's disruptive technology revolutionize the way diabetes is treated around the world -- or will the FDA put the kibosh on this product before it even hits the market? In a new premium research report on MannKind, these complex issues are made crystal clear, in addition to showing you why to buy or sell the stock today. To find out more -- and get a full year of free updates -- click here to grab your copy today.


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  • Report this Comment On February 11, 2013, at 3:31 PM, Fly408 wrote:

    Lol "Fool's tech analyst". This is the worst pump/bash publication going..

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