Whoa! These 3 Stocks Are Outpacing the Dow's Run

Wash. Rinse. Repeat. The Dow Jones Industrial Average is making hitting new highs look easy these days, and no longer does it have to make dramatic jumps to do so, either. Simply tacking on a few dozen points daily is enough to do the trick. Yesterday's 50-point gain to close above 14,447 marked yet another new record and represented the index's seventh straight day of gains as a solid jobs number last week seemed to indicate the economy had really made a turn.

We'll see, but the three stocks below had their own reasons to celebrate, although you should 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.

Company

% Gain

Dex One (UNKNOWN: DEXO.DL  )

18.6%

BlackBerry (NASDAQ: BBRY  )

14.1%

MannKind   (NASDAQ: MNKD  )

11.4%

Who's got short shorts?
While there was no company specific news to account for the rise of Dex One, a local business marketing service similar to Yelp, its stock is up 45% since a recent low at the end of February and it may be going through a short squeeze.

According to data provided by the Nasdaq exchange, Dex One had more than 10.1 million shares sold short as of Feb. 28, representing almost 22% of its float. With low average daily trading volumes, the business promoter had a short interest ratio of an astounding 78 days to cover. That means it would take about two and a half months to completely buy back all the shares sold short. The Motley Fool believes anything over seven days is a lot.

A short squeeze becomes a vicious cycle feeding on itself. As more shorts cover their positions, it drives the price higher, forcing more shorts to do the same. Where it stops, no one knows but Dex One seems to be in the middle of one that just might have some legs. Of course, when it's over it still remains the business that will determine its price and heretofore the market hasn't been willing to accord it much of a valuation.

How do you say BlackBerry in Mandarin?
As the second largest computer maker with a 14.8% share of the global PC-shipments market last year, Lenovo has its sites firmly set on overtaking top-seated Hewlett-Packard, which has a 16% share. It's also the eighth largest handset maker, according to ABI Research , and it wants to vault into the top ranks buying out BlackBerry, the former Research In Motion. At least that's what investors are hoping happens.

Lenovo's CEO said a takeover of the smartphone maker "could eventually make sense" in the scheme of opportunities for external growth and another company executive had made similar rumblings back in January. So with the launch of its new BB10 operating system and AT&T ready to launch its new BlackBerry Z10 touch-screen smartphone on March 22, the handset maker has seen its shares jump 16% over the past week -- and they're up 25% over the last three months.

But analysts don't think much of the takeover talk, at least not in the near term, if for no other reason than the Canadian government might look askance at it. That leaves BlackBerry having to fend for itself with its new models, which isn't so bad considering T-Mobile is releasing the Z10 to business customers in a week or so. While Verizon (NYSE: VZ  ) hasn't said when it will offer the phone, the bar for expectations has been set so low for BlackBerry that analysts believe any gains it achieves will be seen as a huge success.

That's just nutty
Like Dex One, biotech MannKind surged on no apparent news yesterday, and though it's short interest ratio is an elevated 13.5 days to cover, it seems unlikely that was driving the stock higher as it often has double-digit short ratio.

Analysts at Wells Fargo, though, reaffirmed their "market perform" rating but did so in that backhanded way people will do when they're actually criticizing you. Even though the analyst likes the market potential MannKind's inhaled insulin therapy Afrezza holds, he believes "the stock requires too much patience and risk tolerance to recommend buying shares at this time."

Well, analysts who make their living on you trading your account would never want to recommend patience, now would they? Risk is a different matter though as the FDA could always shoot down the treatment or its substantial debt burden could ultimately crush the company. But as I noted last fall, I believe MannKind will not only survive but thrive. I think the biotech has proven Afrezza is viable and that sooner rather than later a partner will emerge to help carry the load. I rated MannKind on Motley Fool CAPS last October to outperform the broad indexes, and it's gained 80% since then compared to a 10% rise in the S&P 500, so let me know in the comments box below if you agree MannKind will prove those with patience are the smarter investors.

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 click here to grab your copy today.

 


Read/Post Comments (5) | Recommend This Article (2)

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 March 12, 2013, at 4:11 PM, Alexa861 wrote:

    Pennystockchief dotcom (Dot means .), is a wonderful site to master the working of BBRY stock

  • Report this Comment On March 12, 2013, at 4:43 PM, gaapster wrote:

    you missed a lot of key information that should have discussed in the paragraph on dexo. for starters, they will be going through a prepackaged bankruptcy in the very near future with no stock dilution, no debt written off, but with favorable adjustments to repayment terms. also, dex has a merger pending with spmd. the two companies have very little territorial overlap, and will cover most of the country after their merger. furthermore, they will be the largest player in the industry. aside from a probable short squeeze, there are some very positive fundamental changes on the horizon for dexo.

  • Report this Comment On March 12, 2013, at 6:43 PM, noelnavarro wrote:

    The diabetes epidemic is a growing worldwide problem that's not going away anytime soon. Afrezza could very well be one of the most significant drug developed in our contemporary time. It is going to dramatically improve the lives of people with diabetes worldwide, who now number 346 million and forecasted to double by 2030.

    In terms of the risk related to FDA rejection of Afrezza, it should be noted that the FDA does not have any issues with the  Afrezza drug itself, but rather the delivery devices being considered for commercial approval. Previous comments from the FDA appear to indicate that they are satisfied with the efficacy and safety profile of Afrezza. The upcomming FDA decision in Q1 2014 is related to the delivery device "Dreamboat". This appears to be a low bar to conquer.

    The consensus valuation of MNKD for the U.S. market only is in the range of $25 to $43 per share after commercialization. If you factor in the global market, it is reasonable to assume that the per share valuation could double. Over a five year horizon after FDA approval (Q1 2014), you could potentially see a conservative 30%+ year-over-year compounded return on investment. MNKD is definitely a long-term investment that could provide extraordinarily high return on investment in the short-run.

  • Report this Comment On March 12, 2013, at 8:42 PM, infektu wrote:

    quote from your article:

    >> Lenovo's CEO said a takeover of the smartphone maker "could eventually make sense"

    Whoa!

    He didn't say that. Link please!

    I know we can't speak French, but still...

  • Report this Comment On March 13, 2013, at 10:45 AM, TMFCop wrote:

    infektu,

    Au contraire, Pierre, he's quoted as saying just that:

    "As for BlackBerry, the file could eventually make sense, but I must first analyze the market and understand the exact weight of this company," he said in response to a question about whether Lenovo would make a move on the smartphone maker."

    http://www.reuters.com/article/2013/03/12/us-blackberry-att-...

    Thanks for reading,

    Rich

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