Whoa! What Just Happened to My Stock?

Resist the urge to high-five everyone in the cubicles next to you. Your stock may have just strapped on a rocket pack and taken off for the moon, but smart investors won't celebrate until they know that upward leap was justified. Without a fundamental basis for the bounce, these stocks can quickly make the return trip down.

Is now the time to lock in profits, or is this just the first step toward even higher valuations down the road? Let's examine several stocks that just hit the afterburners, and see whether they're truly headed into orbit.

Stock

CAPS Rating
(out of 5)

Wednesday's Change

Pacific Capital Bancorp (Nasdaq: PCBC  ) ** 14.1%
National Bank of Greece (NYSE: NBG  ) **** 12.5%
BPZ Resources (NYSE: BPZ  ) *** 12.2%

The market put all of its concerns aside yesterday and rocketed ahead 254 points, or 2.3%. But stocks that went up significantly more are still big deals.

The devil's in the details
Carried higher by the general market euphoria, Pacific Capital Bancorp is also getting a bit of a boost from its plans to engineer a 1-for-100 reverse stock split by the end of the month to keep its shares from being delisted from the Nasdaq exchange; offering shareholders the opportunity to purchase an additional 382 million shares gave Pacific Capital gross proceeds of $76 million. With the rights offering complete, all those new shares will benefit from the reverse split, too.

The regional bank was crushed when the recession rocked California, just as Citizens Republic Bancorp (Nasdaq: CRBC  ) ran off the road with the auto industry in Michigan. Reverse splits have a dicey history; you can monitor Pacific Capital's maneuvers by adding it to the Fool's free portfolio tracker.

It wasn't financial maneuverings that had National Bank of Greece soaring yesterday, but rather a combination of a strong manufacturing report in China and hopeful employment news here at home (and no doubt the reported willingness by the Fed to bail out Europe if necessary).

The threat of a sovereign debt crisis bringing down all of the EU still hangs ominously above foreign capitals. This week's Fed disclosure shows how far the Fed was previously willing to go to contain the banking crisis, as we now know foreign banks were also able to sup at the U.S. taxpayers' trough. Barclays (NYSE: BCS  ) was the recipient of the most cash (grabbing a cumulative total of $232 billion), but UBS, Royal Bank of Scotland (NYSE: RBS  ) , and Societe Generale all had their hands in the taxpayer till, too.

The news that the Fed was willing once again to backstop European banks was heartening indeed, though National Bank of Greece faces hard times regardless, as profit in the first three quarters of this year plummeted 74% over last year's comparable period. CAPS member dag154 doesn't see how the situation won't go from bad to worse:

I live in Greece and pay taxes. I honestly do not see how my country can go on without defaulting one way or another. [National Bank of Greece] may be severely beaten down, but it is perfectly placed to take an even bigger beating when the situation becomes critical.

Tell us on the National Bank of Greece CAPS page what you think about the situation.

Making it to the big time
BPZ Resources finally had some good news after a string of problems beset the oil and gas driller. It announced it was putting its Peruvian wells into commercial production after gas flaring restrictions in the country had shut them down. Two months ago, BPZ ran into a dry hole at its Albacora field off the coast of Peru so it suspended operations there to conserve money.

While CAPS member mrcarlen doesn't see where BPZ will be getting its growth from, 96% of those rating the stock believe it will be able to pump up market-beating results. Peru has some potential to develop energy reserves as even Brazil's Petrobras (NYSE: PBR  ) is looking to invest there.

You can keep track of the company's progress by adding BPZ to your watchlist, and having all the Foolish new and analysis aggregated for you in one place.

Going into orbit
Just because your stock has taken to the stratosphere doesn't mean it won't lose altitude. Markets are known for overreacting. A closer look at what's happened to your stock can give you an edge over other investors who merely follow the market's lead.

That's why it pays to start your own research on these stocks on Motley Fool CAPS, where you can read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from the stock's CAPS page. Then you can decide for yourself whether your stock's headed for reentry, or off to infinity and beyond.

Petrobras is a Motley Fool Income Investor selection. The Fool owns shares of National Bank of Greece. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.


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  • Report this Comment On December 03, 2010, at 4:01 AM, motoGP wrote:

    PCBC returns to be profitble now. It would be 2$ next year (800%) from current price. And it's not a casino, it's real fortune to make real money.

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