Can the Past Month's 3 Biggest Winners Beat the Street Again?

One of the best things about being a long-term investor is that the law of gravity doesn't have to apply to good stocks -- what goes up doesn't necessarily have to come back down. But some stocks can still fly too close to the sun, singing investors who bought in at too dear a price. When we're talking about momentum stocks, one investor's long-term winner could be another's warning sign, so it's important to separate the hype from the truth and find out why a stock is really soaring today and whether or not it can keep rising tomorrow.

Today we'll be taking a look at three of the best-performing stocks on the market over the past month of trading. They might still be great candidates for your portfolio, but we won't know until we dig a little deeper.

Stock

Monthly Performance

Market Cap

P/E Ratio

Plug Power   (NASDAQ: PLUG  )

96.2%

$357 million

N/A

FireEye   (NASDAQ: FEYE  )

86%

$8.89 billion

N/A

Kandi Technologies   (NASDAQ: KNDI  )

86%

$509 million

N/A

Source: Finviz, YCharts, and Yahoo! Finance. 

Plug Power
This tiny fuel-cell maker has taken off in January -- virtually all of its gains have occurred since the beginning of the new year. The company's preliminary fourth-quarter update was the spark that began its rise, as investors gobbled up shares after learning that Plug Power had booked $32 million in orders from a range of major industrial and retail companies. Another big boost came a week later when Plug Power announced the beginning of a hydrogen fuel cell range-extender test program with FedEx trucks. That was the high-water mark for Plug Power shares, which topped out at a near-150% gain on the month before settling in at their current near double:

PLUG Total Return Price Chart

PLUG Total Return Price data by YCharts.

Is it time to get excited yet? Well, Plug Power still boasts a rather small market cap, even after its recent megapops, and it competes in an industry that has produced some spectacular losses despite growing revenue -- the global fuel cell industry's market size was estimated at $785 million in 2012, and it's expected to rise to $2.5 billion by 2018. Plug Power had already achieved a significant cost reduction of more than 40% in its fuel-cell manufacturing in 2012, according to the Department of Energy's Fuel Cell Technologies Market Report (released in October 2013). It stands to reason that further improvements ought to be underway, which should eventually put Plug Power on the path to profitability.

The company is already replicating the shocking rebound many solar stocks began last year after a long stretch of losses, and if it continues to follow that track, there could be a great deal more gains in store. But fuel cells are much further from widespread commercial adoption than solar panels, and Plug Power could find its market position undermined by larger industrial players if the technology finally appears profitable. This is not a stock for the faint of heart.

FireEye
Like Plug Power, FireEye began skyrocketing very early in 2014 after announcing a positive one-two punch of acquiring a rival cybersecurity specialist and upping its previous guidance for 2014 on the back of excellent sales figures. FireEye hasn't been a public company for long, but nearly all of its gains have occurred after the start of the new year:

FEYE Total Return Price Chart

FEYE Total Return Price data by YCharts.

This is out of a total gain of 104.4%! FireEye's acquisition of Mandiant for roughly $1 billion in cash and stock has been heralded as "shrewd" and "game changing" by analysts covered by Investor's Business Daily, due to the complementary nature of the two companies and their already impressive growth rates. Mandiant, you may recall, was the firm that released evidence last year implicating China in a pervasive and ongoing cybersnooping effort directed at hundreds of important public and private American organizations. FireEye is also well-connected to government cybersecurity efforts, as it's been funded by CIA venture capital, according to a Seeking Alpha write-up of the acquisition.

The acquisition no doubt influenced FireEye's guidance boost: The combined company should now see between $400 million and $410 million in revenue for 2014 -- well above the $240 million to $250 million projected for FireEye alone. Total billings were guided to the $540 million to $560 million range, which is far beyond the projection of $350 million to $370 million for FireEye alone.

But FireEye is now worth nearly $9 billion -- a valuation roughly 22 times its expected sales. The company has no immediate projections for profit, either, and unlike some other tech companies that mask great cash flows with losses on the income statement, FireEye is also bleeding cash. Compare that to mature cybersecurity peer Symantec  (NASDAQ: SYMC  ) , which is valued at a bit over two times sales and has a P/E of 20 at a market cap roughly twice FireEye's. Further gains are certainly possible, but you should always be wary of analysts who shoot for the moon with stocks that are already valued in the stratosphere.

Kandi Technologies
Chinese electric- and offroad-vehicle maker Kandi already boasted a multiyear history of stock growth, but its latest surge was the difference between a good investment and a fantastic one -- from a midyear low to its latest high, Kandi shares more than tripled in value. The bounce began in late December after the company reported an improvement in EV sales. That announcement gave the company several days of supersized gains as investors digested the likelihood of Kandi's dominance over the Chinese government's 100,000-EV initiative:

KNDI Total Return Price Chart

KNDI Total Return Price data by YCharts.

Part of this bounce no doubt reflects the same excessive EV-company optimism that pushed Tesla Motors' (NASDAQ: TSLA  ) stock up to levels commensurate with companies manufacturing millions of cars rather than mere thousands, as Kandi (like Tesla) is unprofitable and tallies its sales -- of far-lower-priced small electric cars -- in the thousands. The company's trailing 12-month revenue is just $70 million, which gives its stock a price-to-sales ratio above 7, but unlike its American peer, Kandi boasts positive free cash flow: Its latest numbers show a price-to-free-cash-flow ratio of roughly 26.5, which is well within reason for a fast-growing company on the inside track to a major Chinese windfall. Out of the three highfliers we've examined, Kandi might just be the best opportunity.

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Read/Post Comments (6) | Recommend This Article (8)

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 January 21, 2014, at 1:55 PM, archsteve wrote:

    Plug also has 50 million in orders for 1st quarter 2014. They are above their revenue targets for 2014. That information would be useful!

  • Report this Comment On January 21, 2014, at 2:37 PM, captainccs wrote:

    >>> Kandi (like Tesla) is unprofitable <<<

    No, it's not, although it shows a GAAP loss. The problem is that GAAP is total CRAP. The mark to market adjustment of the outstanding warrants totally overwhelms Kandi's operating profit.

    If you just take the raw GAAP results you'll be totally uninformed or misinformed. Beware GAAP!

  • Report this Comment On January 21, 2014, at 10:28 PM, ICanFool wrote:

    According to the DoE, the amount of platinum in PEM fuel cells has decreased by around 80% during the past decade.

    This trend is expected to continue, albeit at a reduced rate with smaller incremental improvements.

    Even at the high platinum loadings present on these early vehicles, in excess of 100 g, it would only have amounted to a minimal percentage of total vehicle cost.

    Fuel cell technology has moved on a long way since those times however, with Toyota announcing recently that the latest iteration of its fuel cell has reduced platinum loadings to around 30 g.

    Automotive manufacturers know how low they must drive platinum loadings in order for the cost of the fuel cell system to be commercially viable and are clearly continuing to work towards that goal. Their advances over the coming years, especially in the areas of automation and volume manufacturing, will also be beneficial to other users of PEM fuel cells who will be able to take advantage of cheaper, more durable systems in other applications. I look forward to the day when the platinum content (and therefore cost) of an automotive fuel cell is equivalent to that of a diesel catalytic converter, and then we can worry about other issues, like supporting infrastructure development and marketing the technology to customers

    Courtesy of http://www.fuelcelltoday.com/analysis/analyst-views/2013/13-...

  • Report this Comment On January 21, 2014, at 11:25 PM, ICanFool wrote:

    Some automakers want to get serious about bringing hydrogen-powered fuel cell vehicles to market if a big wall can be climbed – the one that puts the cost of H2 vehicles out of reach for some OEMs and at least $50,000 for others. That number could slide down thanks to researchers from South Korea, Case Western University and University of North Texas who have discovered an inexpensive and easily produced catalyst that could replace pricey platinum, the catalyst for the required oxygen-reduction reactions.

    A metal-free catalyst can do the trick, the researchers say. During testing, a cathode coated with graphene nanoparticles edged with iodine turned out to be more efficient in oxygen reduction reaction. It can also generate 33 percent more current than a cathode coated with platinum can create.

    "We made metal-free catalysts using an affordable and scalable process," Liming Dai, a professor of macromolecular science and engineering at Case WesternReserve and one of the report's authors, told Phys.org. "The catalysts are more stable than platinum catalysts and tolerate carbon monoxide poisoning and methanol crossover."

  • Report this Comment On January 21, 2014, at 11:27 PM, ICanFool wrote:

    http://www.sciencedaily.com/releases/2013/06/130605111518.ht...

    Metal-Free Catalyst Outperforms Platinum in Fuel Cell

    June 5, 2013 — Researchers from South Korea, Case Western Reserve University and University of North Texas have discovered an inexpensive and easily produced catalyst that performs better than platinum in oxygen-reduction reactions.

    Share This:

    The finding, detailed in Nature's Scientific Reports online today, is a step toward eliminating what industry regards as the largest obstacle to large-scale commercialization of fuel cell technology.

    Fuel cells can be more efficient than internal combustion engines, silent, and at least one type produces zero greenhouse emissions at the tail pipe. Car and bus manufacturers as well as makers of residential and small-business-sized generators have been testing and developing different forms of fuel cells for more than a decade but the high cost and insufficiencies of platinum catalysts have been the Achilles heel.

    "We made metal-free catalysts using an affordable and scalable process," said Liming Dai, the Kent Hale Smith Professor of macromolecular science and engineering at Case Western Reserve and one of the report's authors. "The catalysts are more stable than platinum catalysts and tolerate carbon monoxide poisoning and methanol crossover."

    And, in their initial tests, a cathode coated with one form of catalyst -- graphene nanoparticles edged with iodine -- proved more efficient in the oxygen reduction reaction, generating 33 percent more current than a commercial cathode coated with platinum generated.

    The research was led by Jong-Beom Baek, director of the Interdisciplinary School of Green Energy/Low-Dimensional Carbon Materials Center at South Korea's Ulsan National Institute of Science and Technology. Fellow authors include: In-Yup Jeon, Hyun-Jung Choi, Min Choi, Jeong-Min Seo, Sun-Min Jung, Min-Jung Kim and Neojung Park, from Ulsan; Sheng Zhang from Case Western Reserve; and Lipeng Zhang and Zhenhai Xia from North Texas.

    Like a battery, a fuel cell converts chemical energy into electrical energy. It works by removing an electron from a fuel, usually hydrogen or methanol mixed with water, at the cell's anode, or positive electrode, creating a current.

    Hydrogen ions produced then pass through a membrane to the cathode, or negative electrode. Here, oxygen molecules from the air are split and reduced by the addition of electrons and combined with the hydrogen ions to form water and heat -- the only byproducts.

    A better, cheaper catalyst than scarce and costly platinum is required if hydrogen fuel cells and direct methanol fuel cells are to become realistic alternatives to fossil fuels, the authors say.

    The technology to make alternative catalysts builds on a simple and cheap industrial process several of the researchers developed to make graphene sheets from graphite.

    Inside a ball miller, which is a canister filled with steel balls, the researchers broke graphite down into single-layer graphene nanoparticles. While the canister turned, they injected chlorine, bromine or iodine gas to produce different catalysts.

    In each case, gas molecules replaced carbon atoms along the zigzag edges of nanoplatelets created by milling. Not only were the edges then favorable to binding with oxygen molecules, but the bond strength between the two oxygen atoms weakened. The weaker the oxygen bonds became, the more efficiently the oxygen was reduced and converted to water at the cathode.

    In testing, a cathode coated with iodine-edged nanoplatelets performed best. A cathode coated with bromine-edged nanoparticles generated 7 percent less current than the commercial cathode coated with platinum, the chlorine-edged nanoplatelets 40 percent less.

    In a test of durability, electrodes coated with the nanoplatelets maintained 85.6 percent to 87.4 percent of their initial current after 10,000 cycles while the platinum electrodes maintained only 62.5 percent.

    Carbon monoxide was added to replicate the poisoning that many scientists blame for the poor performance of platinum at the cathode. The performance of the graphene-based catalysts was unaffected.

    When methanol was added to replicate methanol crossover from the anode to cathode in direct methanol fuel cells, the current density of the platinum catalyst dropped sharply. Again, the graphene-based catalysts were unaffected.

    "This initial research proves such catalysts work better than platinum," Baek said. "We are working now to optimize the materials."

  • Report this Comment On January 21, 2014, at 11:37 PM, ICanFool wrote:

    if interested read http://www.sciencedaily.com/releases/2012/08/120824103022.ht...

    Superior Fuel Cell Material Developed

    Aug. 24, 2012 — Using a mixture of gold, copper and platinum nanoparticles, IBN researchers have developed a more powerful and longer lasting fuel cell material. This breakthrough was published recently in the journal, Energy and Environmental Science.

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    Fuel cells are a promising technology for use as a source of electricity to power electronic devices, vehicles, military aircraft and equipment. A fuel cell converts the chemical energy from hydrogen (fuel) into electricity through a chemical reaction with oxygen. A fuel cell can produce electricity continuously as long as there is a fuel supply.

    Current commercially available fuel cells use platinum nanoparticles as the catalyst to speed up the chemical reaction because platinum is the only metal that can resist the highly acidic conditions inside such a cell. However, the widespread use of fuel cells has been impeded by the high cost of platinum and its low stability.

    To overcome this limitation, a team of researchers led by IBN Executive Director Professor Jackie Y. Ying has discovered that by replacing the central part of the catalyst with gold and copper alloy and leaving just the outer layer in platinum, the new hybrid material can provide 5 times higher activity and much greater stability than the commercial platinum catalyst. With further optimization, it would be possible to further increase the material's catalytic properties.

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