U.S. markets rose on continued hopes for European normalcy, yet even though your stock strapped on a rocket pack and went even higher, resist the urge to high-five everyone in the cubicles next to you. 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.
Pacific Biosciences of California
With the Dow Jones Industrial Average (INDEX: ^DJI) rising 102 points yesterday, or 1%, stocks that went appreciably higher are pretty big deals.
There was no reported news for Pacific Biosciences of California that should drive it so much higher, but a few weeks ago, the development-stage gene-sequencing firm plummeted after reporting it was cutting 130 positions, or 28% of its workforce. Layoffs are a widening problem, and not just for the biotech industry, even though Dendreon
But the market for genetic analysis technology hasn't gained the traction Pacific Biosciences was anticipating. This was underscored by the early reporting of third-quarter results by Illumina
I think it is fair to say that adoption will be slower than management's original optimistic projections because of the price tag; however, my suspicion is that the razor-and-blade model will allow them to eventually become profitable as specialized centers like ours adopt them. They really do have capabilities that leave the competition in the dust for certain applications.
The Chevy Volt from General Motors
So although investors in electric-car-battery maker A123 Systems cheered the news of GM's decision to introduce a real all-electric vehicle for the 2013 market, the Chevy Spark, don't expect too much to come of it. GM had once promised 10,000 Volts sold in 2011, and unless there is a sudden swelling of demand, it's going to fall far short.
In August, A123 was selected by GM to be its battery maker, and the company said it expected to produce "tens of thousands" of battery packs for them. But GM still has to prove it can make an electric car the public wants.
AONE123 is one of the leading suppliers of Li batteries. They supply the batterys to GM for example for their electric/hybred cars. Hybred cars are the future for automobiles.
Going hog wild
Doubts about the veracity of the financial operations of Chinese hog farmer Zhongpin have weighed heavily on its stock, which trades 68% below its 52-week high. Earlier this summer I expressed concern that it was able to be so much more profitable than its peers because it used an "industrial cluster approach" to its farm practices, and others have suggested it is overstating the number of hogs it buys as well as its distribution channel. Some Fools have wondered whether, on a more practical level, its interests just aren't aligned with shareholders'.
With no company-specific news accounting for Zhongpin's rise yesterday, I find it all too likely the gains will be fleeting.
CAPS members are hopeful, though, with 96% of those rating Zhongpin thinking it will outperform the broad market averages. Let us know on the Zhongpin CAPS page if you believe the hog farm can rise above the sty of Chinese fraud, then add the stock to the Fool's free portfolio tracker to keep track of its progress.
Fool contributor Rich Duprey holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Dendreon. Motley Fool newsletter services have recommended buying shares of Illumina, General Motors, and Pacific Biosciences of California. Motley Fool newsletter services have recommended writing puts in Zhongpin. 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. The Motley Fool has a disclosure policy.