5 Stocks Blasting Off

Editors' note: Contrary to reporting in a previous version of this article, there was no court ruling or finding of liability with respect to either party in Noble and Pullman's legal dispute. The details of the dispute have been corrected. The Fool regrets the error.

Almost anything can happen in the course of just one week.

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 like smelling smoke or hearing a scream or a cheer. Upon further investigation, it might turn out to be nothing -- but it could be a major event.

A big upward move in a stock’s price can indicate that something has materially changed within a company to radically alter its desirability as an investment. The purpose of this weekly column is to decipher the reasons behind the week’s biggest gainers, and to report the findings from further investigation.

This week’s stocks can be compared in our 115,000-member CAPS community. Without further ado:

Surging Sciele
The small-cap drugmaker surged almost 60% this week when Japanese pharmaceutical company Shionogi agreed to buy the company for $31 per share.

The stock had received the maximum five-star rating from the CAPS community, with a high growth rate and a promising drug pipeline. Five-star companies have significantly outperformed the market, and in this case, the CAPS All-Stars were proven right again -- they had rated this stock with 70 outperforms and only one underperform. Although Sciele wasn’t specifically cited as a takeover target in CAPS pitches, Shionogi was obviously of a mind with CAPS members as the Japanese drugmaker sought to gain exposure to the U.S. market.

Medivation motivation
Shares of this biotech company took off this week when Pfizer (NYSE:PFE) agreed to take over the marketing and development of Medivation’s Alzheimer’s drug, Dimebon, for $225 million up front and $500 million plus 40% of U.S. profits if the drug gets FDA approval.

The fact that a huge company like Pfizer is willing to take a chance on throwing money and support behind Medivation’s drug certainly gives the drug (and Medivation) added credibility, not to mention up-front money. The $225 million will shore up the company’s tenuous cash position. Although the Pfizer deal isn’t as good for Medivation as getting the drug approved itself would be, it’s the next best thing because of the up-front money and the increased odds of approval.

A Noble goal
Per the settlement of a dispute regarding its 2006 acquisition of Pullman Industries, the tiny auto-parts company will not have to pay a previously agreed-upon $14 million to former Pullman shareholders. In addition, it received $2.3 million of the $7.3 million that was held in escrow pending resolution of the dispute.

Noble has a total market cap of only $183.3 million, a cash position of $14.9 million, and EBITDA of $63.53 million, so the settlement really makes a difference. Consequently, the stock is up more than 26% for the week. But even after this rally, the stock is at only $7.58, when just over a year ago it was over $20. This is a two-star CAPS stock that has been downgraded from a five-star stock, and the reason is none too complicated: This company and its industry are hurting in this economy.

Go West, young investor
Shares of oil refiner Western Refining took off this week, in anticipation of reduced capacity and higher margins resulting from Hurricane Gustav and other impending storms. As damage and power outages from the storms disrupt capacity, the refiners will be able to charge higher prices going forward, which will improve their badly battered margins.

Last quarter, Western Refining announced much lower year-over-year profit because of reduced margins resulting from higher oil prices. With the recent slide in the price of oil, not to mention pent-up demand resulting from the storms, the refiner is getting a nice short-term bump.

Stone cold
Shares of paper companies soared this week when International Paper (NYSE:IP) implemented a price hike on container board. It is estimated that if the price hike is maintained, Smurfit Stone could more than triple current earnings estimates for the coming year. This information combines nicely with the fact that container inventories are at their lowest levels in 20 years.

Near-term circumstances seem to be lining up nicely for Smurfit Stone. The stock is currently rated just two stars by the CAPS community, but that could change. Who would ever have thought that paper could be sexy?

Final thoughts
Stock prices always move higher for a reason. Sometimes that reason is just a short-term blip, but sometimes it materially affects the longer-term performance of a stock. Is a weekly stock movement a temporary fluke or the signal of a new trend? Regardless of the answer, it’s almost always interesting.