You've seen it before -- the crazy moves, the big numbers, that look in their eyes. That's right, I'm talking about the market's big single-day movers. If it's not some stock jumping 70% in one day and making you fleetingly jealous that your stocks don't do that, it's some other stock plunging 50% in a matter of hours and making you wonder whether there's not something vaguely criminal about it.
Now you can play judge and jury for these stock market suspects. I will present the case on four of these rowdy stocks, and you'll have the chance to visit The Motley Fool's new CAPS investing service to make your own call.
|
Stock |
Gain/Loss on 2/21 |
CAPS Rating |
|---|---|---|
|
Bionovo (OTC BB: BNVI.OB) |
27.3% |
|
|
Jupitermedia |
25.6% |
|
|
Novastar Financial |
(42.5%) |
|
|
Scottish Re Group |
(23.4%) |
So, ladies and gents, I present you with the following cases and leave the judgment to you. When you have your verdict, head right on over to CAPS and share your thoughts with the rest of the community.
1. Case BNVI.OB
Bionovo is an OTC resident and developer of drugs for women's health and cancer treatment. The stock is a repeat offender on the upside, with previous speeding violations back on Jan. 17 (up 24.4%), Jan. 18 (up 17%), and Jan. 30 (up 15.9%). On Jan. 22, the stock went the other direction, declining 17.2% when the company announced the pricing of a $15.7 million private placement.
The company's leading drug candidate, MF101, is a treatment for menopausal hot flashes and night sweats. Unlike hormone-replacement therapy, which has been connected to an increased risk of cancer, MF101 is an all-natural therapy that works on estrogen receptors not connected with tumor growth. Enrollment for phase 2 trials of MF101 closed in October, and results are expected in April of this year. The trial is being managed out of the highly respected University of San Francisco Medical School.
The stock's jump today, like some of its past big leaps, is one of those mysterious moves that come without any news or significant events at the company. Judge this case.
2. Case JUPM
Jupitermedia is the operator of the JupiterImages online image repository. The company derives its revenue from sales of images on JupiterImages, advertising on its JupiterWeb website network, and sales of market research services.
Financially, the company has made quite a turnaround in the past few years. After biting the bullet hard in 2001, it saw revenue rise at an average annual rate of 53% between 2002 and 2005. The company's operating margin went from just about nil in 2003 to 36% for the full 2005 fiscal year, though it is back down to 13% for the first nine months of 2006.
The company has been very liberal about using acquisitions to drive growth -- it has made more than 10 acquisitions of significant size in the past three years. The excitement today, though, has the tables turned, as The New York Post sparked speculation that competitor Getty Images
3. Case NFI
Oh, the horror! What a mess it is over at subprime lender NovaStar Financial. As housing continues to feel the squeeze, lenders who immersed themselves in subprime mortgages are hearing that distinct blue note loud and clear. Earlier in the month, New Century Financial
Much of the story is the same basic tune called by others in the industry: Loans are turning sour faster than you can say "no money down." For NovaStar, the issue was compounded by the CFO's comments in the company's earnings release; he mused on whether it would be beneficial for NovaStar to drop its REIT status as taxable income drops to around zero for 2007 to 2011. Toward the end of the trading day, the company issued an 8-K to emphasize that it is taxable income, not GAAP income, that will drop off. But investors, many of whom had been seeing double-digit dividends down the road, didn't relent.
As bad as things are at NovaStar, the crux of this case is this: Will the stock continue down after losing 43%, or has it been adequately punished? Judge this case.
4. Case SCT
As our fourth and final case, we have Scottish Re Group, a stock that has not only disappointed investors today, but also has been offending all year. Today's 23% plunge was just another brick in the wall, as shareholders have seen the stock slide more than 80% in the past 12 months.
Although the stock had already started to slip before the company announced its second-quarter results, the announcement sent the shares down 75% in a single trading session. They came back up 71% the following day, but that was cold comfort to those still down 57%. The CEO was sacked, the company was put up for sale, losses continued, and it finally ended up turning to MassMutual Financial and Cerberus Capital Management to arrange a $600 million capital infusion.
Tuesday's earnings release showed more ruddy hues on the profit line and was way below Wall Street's expectations. After the market close, credit rating agency A.M. Best released comments that could be taken in a positive light, noting that much of the fourth-quarter loss was driven by writedowns of goodwill, deferred acquisition costs, and other balance-sheet items. Though Scottish Re's CAPS rating has been knocked down from its earlier five-star perch, many players remain positive, particularly in light of Cerberus' involvement. Judge this case.
Stay tuned for another visit with the Honorable Judge CAPS next week, and until then, keep up your judgmental ways!
More CAPS coverage:
- Invest with spending trends.
- As if Wall Street needed a wish list.
- Get your frugal on!
Intrigued by value? Philip Durell and the team at Motley Fool Inside Value can help steer you to some authentic bargains. Check out the newsletter free for 30 days.
When it comes to short-term trading, Fool contributor Matt Koppenheffer is less Jesse Livermore and more Uncle Jesse, though he doesn't mind a little volatility to spice up his life. He does not own shares of any of the companies mentioned. The Fool's disclosure policy is here for your own good and will never judge you -- no matter how bad a hair day you're having.
