7 Stocks on Fire

There are many reasons why the price of a stock can see a big move upward in just seven days. But whatever is behind it, a surge in the price of a stock is an alarm. It's a bit like hearing a cheer. Upon further investigation, it might turn out to be nothing -- but it could be a major event.

The question to ask, then, is has something materially changed within a company to radically alter its desirability as an investment? Let's attempt to answer that for some stocks seeing recent upward price action.

To help, we'll enlist the aid of our 115,000-plus-member Motley Fool CAPS community. Stocks are rated from one through the maximum five stars by CAPS. So far, our data has shown that five-star stocks have seriously outperformed the market.

Without further ado, here are some of this week's biggest movers.

Company

Industry

CAPS rating

One week price change

Ames National (Nasdaq: ATLO  )

Banking

**

70.3%

Western Alliance Bancorporation (NYSE: WAL  )

Financial services

**

73.2%

Media General (NYSE: MEG  )

Media

*

70.7%

Banctrust Financial (Nasdaq: BTFG  )

Banking

*

52.4%

Frontier Financial (Nasdaq: FTBK  )

Banking

**

47.3%

Corus Bankshares (Nasdaq: CORS  )

Banking

*

48.2%

Sandisk (Nasdaq: SNDK  )

Electronics

****

37.2%

Source: Motley Fool CAPS and Yahoo! Finance. Price change between Sept. 11 and Sept. 18.

These companies are not recommendations but rather a possible starting point for further research.

Banks get a bailout
Shares of U.S. banks surged Thursday on rumors that the federal government would buy distressed illiquid assets from financial institutions. Banks, theoretically, could then get these assets off their books and be in a better position to lend money and conduct business. This may well throw a lifeline to banks that would have otherwise failed. The action will likely cost the taxpayers hundreds of billions of dollars.

Will this mother of all fed bailouts be enough to finally get us past the crisis? Only time will tell. This is obviously good news for financial institutions. They can be liberated of the mistakes of their overindulgences and continue on. The taxpayers will atone for their sins. What a juicy idea. The market loved it.

What's going on with Media General stock?
Shares of the media company more than doubled on Thursday after the company reported that August was its best month so far this year. Revenue for the month was still down 4.4% from the same month last year. But, the results were an improvement over recent results, and the market loved it. Media General got a bump in its broadcast revenue from Olympic and political advertising on its television stations. This helped offset the 19.8% slip in advertising sales from its publishing division.

I can see the stock rallying on not-as-bad-as-expected news. But, a double in the stock price in just one day seems excessive.

Sandisk scoffs a lowball offer
Sandisk was around $16 a stub a week ago. This week, Korean electronics giant Samsung made a takeover offer of $26 per share, which Samsung promptly spurned. The stock shot up 41% to close at $21.23. Sandisk claimed that Samsung is trying to take advantage of the battered stock price.

Sandisk has a point. It's 52-week price range is $13-$56. Understandably, Sandisk is reluctant to sell at $26. The chipmaker may get a higher offer from Samsung or an offer from another suitor. Or, they could fend off buyers and ride things out.

Final thoughts
Stock prices often move higher for a reason. These did. But it pays to make sure you understand what's going on. Is the movement a temporary fluke or the signal of a new trend?

That's where CAPS can help. Our 115,000-plus members are on top of many of these situations. You can check out what they have to say, do some research of your own, and contribute your own thoughts. Let us know what you think about this week's movers. Our members are waiting to hear what you have to say. CAPS is 100% free, so simply click here to get started.

Fool contributor Tom Hutchinson holds no financial position in any companies mentioned. The Motley Fool has a disclosure policy.


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