You saw the headlines. You know your stock price made a big move. But what does that portend for your investment's future?
By pairing the latest news with the collective wisdom of our 170,000-strong Motley Fool CAPS investing community, we might be able to discover whether your stock's latest exploits are a short-term hiccup -- or the start of a much bigger trend.
The following stocks have all made big moves in recent days:
|
Stock |
CAPS Rating |
Change Past Week^ |
|---|---|---|
| Harbin Electric (Nasdaq: HRBN) | * | (48.4%) |
| Deer Consumer Products (Nasdaq: DEER) | * | (30.5%) |
| BSD Medical (Nasdaq: BSDM) | *** | 20.5% |
Source: Motley Fool CAPS.
^From June 11-18.
Can't fight this fire
A devastating charge of fraud halved Harbin Electric's stock last week, and it was only thanks to a bit of managerial bravado that it didn't end the week even lower. The electric-motor maker said the fraud accusation by Andrew Left at Citron Research was "based on factually incorrect as well as out-of-context information." Hope apparently springs eternal, and the stock shot up 20%.
Trading at China-Biotics (Nasdaq: CHBT) was halted last week, an action that Left had hinted would happen after it was audited. The probiotics company said its accountants raised "serious issues" and it wouldn't be filing its annual report anytime soon. The fraud at Longtop Financial (NYSE: LFT) was also uncovered by Left.
There has been a lot of skepticism about Harbin, particularly after its CEO said last year that he wanted to take the company private and remove it from the glare of public scrutiny. The Citron report last week raised new doubts about Harbin's ability to actually finance the deal.
There really are no reasons to trust that companies in China that go public through reverse mergers are honest. They've been proved to be spectacular frauds too often to warrant our investment dollars. Deer Consumer Products is just another example of one of these reverse takeover stocks accused of financial shenanigans. Although it used its latest earnings report to quell some of investors' misgivings about the company, no doubt the Harbin accusations brought it to the forefront again.
Almost two-thirds of the CAPS All-Stars rating Deer think it will fall mightily short of expectations. While Harbin enjoys substantially more support from the CAPS community, All-Star liszewski back in March thought it was just a matter of time before fraud accusations caught up with it:
The only thing keeping the price from collapsing is this phantom $24 buyout offer from the CEO Yang. Just a ploy to squeeze shorts in my humble opinion. I doubt it ever materializes. He will have great difficulty securing financing and I suspect he knows more about the company than I do, which would imply that he knows the books are being cooked.
Playing the bounce Harbin enjoyed Friday, I've gone and rated it to underperform the market indexes. Is this just a case of piling on? Head over to the Harbin Electric CAPS page and let us know why you think the electric-motor maker won't seize up again.
Hotshot
Anyone who has read my writings on BSD Medical know I've gone from skeptical that it was little more than a cash machine for its founder to grudging acceptance it may have a viable technology.
To effectively compete against AngioDynamics (Nasdaq: ANGO) and Boston Scientific (NYSE: BSX), which offer rival technology, BSD hired a professional, outside sales staff. It may be just what the device maker needed to make the transition. It reported it's been able to get clinical evaluations scheduled for its MicroThermX compact microwave generator system at hospitals, previously a tough nut for it to crack. Overcoming a history of shams has been hard, but CAPS member markz13 agrees the new sales staff is key to the future.
But let's be clear: These are only evaluations, not sales. A 20% jump in value because someone's going to look at your product hardly seems like a concrete gain. Maybe the technology will sell itself once they examine it, but it's premature to be bidding up the stock. BSD hasn't been very shareholder-friendly, diluting shares every chance it gets when the stock price jumps.
Add BSD Medical to your watchlist to see whether it can burn through the fog of doubt.
