The market roared to life on the hope that Europe saved itself, but just because 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.
CAPS Rating (out of 5)
VASCO Data Security
With the markets soaring 339 points yesterday, or 2.9%, stocks that went appreciably higher are pretty big deals.
Shining a light on growth
The financial deal in Europe helped calm jittery nerves in the solar sector, helping push PV maker Suntech Power in particular higher because of its exposure to the continent, where it derives more than three-quarters of its revenues. First Solar
The news had a broad-based effect on the industry, though, as LDK Solar
Suntech was also helped by published comments on Business Insider that the solar shop's CEO said that Suntech was still making profits, even after severing a long-term supply agreement with MEMC Electronic Materials. The claim refuted rumors of a possible bankruptcy for the company.
CAPS member cibient says the market depressed Suntech's stock by confusing it with the high-profile bankruptcy of a certain politically connected solar company.
Wow! Suntech is NOT Solyndra, Wall Street! Sure, I get that the macro global outlook is terrible, and oil prices are dropping. But so follows for raw materials. STP is well positioned to ride back up whenever energy is ready to make a move back up.
After a subsidiary issued a digital certificate to an entity fraudulently claiming to be Google
Yet the data-security parent surprised the market by reporting better-than-expected profits and lifting its guidance for the year. VASCO was burned by the episode, but DigiNotar's contribution to the overall revenue picture was minimal, and the company will take a hit of less than $5 million from the episode (not including any lawsuits that might arise).
As VASCO noted, its customers discerned the difference between its business and DigiNotar's, something the markets failed to do. Highly rated CAPS All-Star member sehawk99 says the real risk facing it is a lack of a deep competitive moat.
Yes, the services they offer are, or should be, in high demand. The problem is that VDSI has no real moat to speak of. In their industry, I view them as competent but not formidable. ... All in all, I'm thinking the stock has a reasonable shot at a 50% gain in the next year or two.
Walking the Cat-walk
After both Illinois Tool Works
Terex finds itself in the enviable position of being able to raise prices while further reducing its costs, a situation that lends itself to higher margins down the road. It is also unique in that rental companies comprise its sales outlet rather than having a network of dealers to push product through. It was large rental companies placing big orders for its aerial work platforms that helped segment sales jump 59% in the quarter.
With almost 1,300 CAPS members weighing in on the equipment specialist, 97% of them think it will continue to outperform the broad market indexes. Add Terex to the Fool's free portfolio tracker if you'd like to rent a front-row seat to its future opportunities.
Fool contributor Rich Duprey holds no position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of First Solar and Google. Motley Fool newsletter services have recommended buying shares of First Solar, Google, and Illinois Tool Works. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.