Whoa! What Just Happened to My Stock?

The EU's decision to seize the bank accounts of ordinary Cypriot depositors was front and center again as concerns that the financial sector could come under tremendous pressure should the crisis ripple out from the island caused the Dow Jones Industrial Average to fall by 90 points yesterday. With Bank of America and JPMorgan Chase wobbling, the index pulled back from its recent high.

The three stocks below, however, were far removed from the scene of international intrigue rising on their own merits. Yet 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

Acadia Pharmaceuticals (NASDAQ: ACAD  )

23.9%

SUPERVALU  (NYSE: SVU  )

11.7%

Denison Mines (NYSEMKT: DNN  )

9.5%

Psychoanalyzing growth
Psych! Drug developer Acadia Pharmaceuticals said its drug pimavanserin met a series of secondary end points in a phase 3 clinical trial following previously reported results that it met its primary end point. The potential for FDA approval of what could become a first-in-class treatment has markedly improved and investors responded accordingly.

Pimavanserin is designed to treat psychosis in patients with Parkinson's disease, a debilitating disorder that develops in up to 60% of Parkinson's patients but for which there are no drugs currently approved in the U.S. to specifically treat it. Because there's also the very real possibility it could be used to treat a similar disorder in patients suffering from schizophrenia and Alzheimer's disease -- and for which Acadia has the drug in phase 2 trials -- this could be a huge winner for the pharmaceutical.

Of course, should it make it through the FDA's regulatory gauntlet it will have to compete with various anti-psychotic drugs like AstraZeneca's Seroquel, Eli Lilly's Zyprexa, Risperdal from Johnson & Johnson, and generic clozapine -- all of which doctors prescribe off-label -- but a drug specifically approved to treat the disorder just might gain a lot of traction .

Clean up in aisle 3!
Because it already owned 655 Albertsons stores from when SUPERVALU acquired the chain in 2006, Cerberus Capital Management was always the lead bidder to acquire the chain when it was put up for sale, but it was also out front because it was willing to accept the all the brands that the supermarket operator was selling as opposed to cherry-picking the ones it wanted.

In January, SUPERVALU said it would sell Albertsons, Acme, Jewel-Osco, and a number of other names to AB Acquisition, a Cerberus subsidiary, in a deal worth $3.3 billion. SUPERVALU would get $100 million in cash and have $3.2 billion in debt assumed and will also keep the Save-A-Lot banner that has 1,300 stores nationwide. Cerberus will also become a major shareholder owning more than 21% of SUPERVALU's stock and will get two seats on its board of directors.

Shares of SUPERVALU are up 90% in 2013 and have gained nearly twice that amount from the lows it hit last year.

Striking back
Uranium miner Denison Mines surged higher yesterday on no company-specific news, but a worker strike at a Chinese uranium mine in Niger that's gone on for three days so far -- threatens to go on indefinitely -- was likely behind the rise in its stock.

The Niger mine opened in 2011 and is expected to produce 2,500 tons of uranium annually by 2015. The country is the top producer of uranium for France's nuclear power industry and the fear is that a strike at one mine could spread to others, creating more problems for the industry. 

While Denison's shares spiked higher, Cameco hardly moved at all on the news. Shares of both miners, however, are up so far in 2013, though Denison has been the better performer with its stock 20% higher compared to a 7% rise for Cameco.

While you can certainly make huge gains in big moving stocks like these, the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

 


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  • Report this Comment On March 22, 2013, at 8:54 PM, vireoman wrote:

    So you believe that a miner's strike in Niger was "likely" responsible for the abrupt rise in DNN's share price, whereas the two largest miners, Cameco and Uranium One, were flat and down, respectively. Interesting theory.

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