The markets fell again yesterday by triple-digit amounts, but resist the urge to high-five everyone in the cubicles next to you just because your stock strapped on a rocket pack. 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.
With the Dow Jones Index (NYSE: ^DJI) falling another 101 points yesterday, or almost 1%, stocks that went appreciably higher are pretty big deals.
Chipping away at the competition
Its IPO earlier this year had Sequans Communications drifting higher until second-quarter results showed demand as listless as the stock, which subsequently plummeted. But the excitement surrounding mobile communications gave some investors hope that there would be renewed interest somewhere down the road.
Sequans arrived there yesterday when it reported the Chinese government had approved its LTE chips that it was testing with Huawei and Alcatel-Lucent's
The chip maker is still flying below the radar of much of Wall Street and Main Street, but 91% of the few dozen CAPS members rating Sequans believe it will outperform the broad market averages.
Tell us in the comments section below or on the Sequans Communications CAPS page if this is just the start of getting the ball rolling.
Don't toy with JAKKS
Toymaker JAKKS Pacific isn't able to cash in on its brands through lucrative movie deals like rival Hasbro
So management was seemingly justified in rebuffing the private equity firm Oaktree Capital Management in its efforts to lowball a bid to take the toymaker private. Oaktree went hostile yesterday with a $670 million bid for JAKKS.
But there is something to be said for Oaktree's concern that JAKKS show the wherewithal to finance an expansion program if it wants to command a higher multiple than what is offered. Hasbro, for good or ill, now relies on movies like Transformers, Star Wars, and a passel of Avenger characters to drive much higher growth. JAKKS is still "just a toy company," and though it's a lucrative business, it doesn't help drive valuations higher.
Although JAKKS carries similar multiples to Hasbro and Mattel, they have additional levels they can pull that are unavailable to JAKKS. The CAPS community still thinks it can pull on what it has, as 95% of the more than 450 members rating it believe it can outperform the broad market averages.
A betting man
Since the company posted worse-than-expected second-quarter results, shares of clothing retailer Coldwater Creek have been on a tear higher. Well, there was a delay of about a week until its chairman and CEO Dennis Pence started scooping up shares with both hands when they dipped below $0.90 a stub. And he's kept on going, buying the stock at various price points on up to $1.40 earlier this week.
The Peter Lynch maxim of why insiders might be buying here (they think the price is going to go up) is certainly one explanation, but it also becomes a self-fulfilling prophecy, too, particularly when you're buying $1.4 million worth. It has been performing fundamentally worse than rivals like Chicos FAS
CAPS member HDTVBG finds comfort in Pence's manning the helm and what that could mean for its target customer.
Dennis Pence is back in the saddle again. Can he fix what broke? New catalog looks pretty good -- could be catnip for ladies of a certain age.
Let us know on the Coldwater Creek CAPS page if you would consider trying the retailer on for size.
Going into orbit
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 re-entry, or off to infinity and beyond.