3 Stocks That Will Probably Make Huge Moves This Week

A high short interest, plus upcoming earnings announcements, should have these stocks making big moves in the coming days.

Jan 19, 2014 at 7:00AM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

Making investment decisions based on short-term movements in the stock market is not the tried and true way to financial security. Focusing on the long-term trends -- and knowing what variables truly matter over the long run -- is a much more surefire, if boring, approach.

"So why even write an article about big movers for the week ahead?" you may ask. The answer is that we're all human, and no matter how much we may believe to the contrary, we're liable to make emotional decisions when we see our stocks making huge moves.

This article is meant to prepare investors in three companies for big moves in the week ahead. The reason these three companies are likely to be volatile is that they're all highly shorted, and they're reporting earnings this week.

Last week, there was only one such stock identified. But sure enough, it popped as much as 10% following earnings. Here are this week's three stocks to watch:

Company

% Shares Short

When

Expected Revenue (in Millions)

Expected EPS

InvenSense (NYSE:INVN)

33%

Tuesday

$66.8

$0.12

Advanced Micro Devices (NASDAQ:AMD)

18%

Wednesday

$1,500

$0.06

Fusion-io (NYSE:FIO)

18%

Thursday

$89.4

($0.10)

Sources: finviz.com, E*Trade.

InvenSense
This company makes micro-electro-mechanical system gyroscopes. While a lot of techies out there might know what that means, the layman's version is this: The company makes the technology that allows devices to know when and how they are being moved. The easiest and earliest reference point would be Nintendo's first-generation controller.

Screen Shot

  Source: Wikimedia Commons.

Shares have more than doubled since last April, which has some investors betting that a drop is in the near future. But more importantly, the company has been engaged in a lengthy court battle with STMicroelectronics for a while now. Beyond needing to continue out-innovating STM, if InvenSense were to lose the case, it could have negative consequences for investors.

Advanced Micro Devices
AMD is a worldwide semiconductor company that focuses on servers, PCs, and mobile devices -- though it was very late to the scene for mobile. Shares of the company are up about 80% since bottoming out last April, but they still sit almost 46% lower than they were in early 2012.

The key to AMD's future is twofold. The company's chips were selected to be in Sony's PS4 and Microsoft's Xbox One. Strong sales here would definitely be a boost to the company. But the second half of the equation is that the PC market needs to improve moving forward, as the prevalence of mobile devices has continually eaten away at the once-ubiquitous PC.

Fusion-io
This company with a funny name is in the business of both hardware and software to enable data storage. Over the past year and a half, shares have fallen more than 70%. The problem hasn't necessarily been the quality of Fusion-io's products, but its inability to compete with others on price.

Specifically, EMC has roughly $10 billion in cash on its balance sheet; Fusion-io has only about 2% of that amount, with $225 million. That's important, because EMC can offer its memory products for a steep discount and still survive, but if Fusion-io wants to match those prices, it will be losing money it can't afford to lose.

Stay focused on the long term
As I said at the beginning, you won't make it rich by betting on short-term movements.  As every savvy investor knows, stock market gurus like Warren Buffett didn't make billions by betting on half-baked stocks. He isolated his best few ideas, bet big, and rode them to riches, hardly ever selling. You deserve the same. That's why our CEO, legendary investor Tom Gardner, has permitted us to reveal The Motley Fool's 3 Stocks to Own Forever. These picks are free today! Just click here now to uncover the three companies we love. 

Fool contributor Brian Stoffel has no position in any stocks mentioned. The Motley Fool recommends InvenSense and owns shares of EMC, InvenSense, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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