The markets went into the long weekend with a bit of good cheer, rising as lower unemployment numbers and better housing figures made everyone feel jolly. So just because your stock strapped on a rocket pack and went 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.
|
Stock |
CAPS Rating (out of 5) |
Friday's Change |
|---|---|---|
| RAM Energy Resources (NYSE: RAM) | *** | 22.9% |
| Delcath Systems (Nasdaq: DCTH) | ** | 17.3% |
| Rambus (Nasdaq: RMBS) | ** | 12.2% |
The markets jumped points Friday, or 1.7%%, so stocks that went appreciably higher are pretty big deals.
When you're hot, you're hot
It's not the Big Muddy, but the Mississippian oil play clearly looks like a prime investment opportunity. Spanish oil giant Repsol is ready to invest $1 billion in SandRidge Energy's (NYSE: SD) Mississippi Lime oil projects. Also, RAM Energy Resources got a new CEO and a half-billion-dollar cash infusion to further develop its Mississippian assets in Oklahoma. Shares of RAM have effectively doubled after two days of surging valuations.
The Mississippian region is one of those oil plays that came about as a result of the proliferation of horizontal oil drill technology, and SandRidge has been the focal point for development, with 92% of the wells there.
RAM got the cash from Halcon, which will acquire almost three-quarters of its outstanding shares. The new CEO is Halcon's founder, which created the company after guiding Petrohawk Energy to a $12 billion buyout by BHP Billiton.
RAM will change its name after the deal closes in the first quarter of 2012, as highly rated CAPS All-Star EnigmaDude notes, and thinks that despite the huge jump in value of RAM, there's more still to come: "Recent infusion of capital gives this one plenty of additional upside. New company will be called Halcon Resources Corp."
Tell us in the comments section below whether you think RAM will butt heads with a further advances, and add the stock to the Fool's free portfolio tracker.
Call off the dogs
Shares of Delcath Systems have been running higher after appointing a distinguished doctor to its medical advisory board midweek. Since making the announcement on Wednesday, Delcath's stock is up 43%. The medical-device maker needed a bit of good cheer, because even with the bump in value, shares still trade for a quarter of the value they did at their high for the year.
Delcath's problems began earlier in the year, when the FDA sent a refuse-to-file letter regarding its chemotherapy system. The regulatory agency wanted more information about inspections involving Delcath's manufacturing plant along with additional safety information.
A respected expert on liver pathology will help Delcath develop for Europe and steer through the U.S. regulatory maze facing its Hepatic Chemosat delivery system, which administers high-dose chemotherapy to diseased organs. Delcath is focusing first on liver cancers. Bristol-Myers Squibb (NYSE: BMY) just reported that its experimental liver cancer drug brivanib didn't meet the goal of improving survival outcomes compared with a placebo.
You can let us know on the Delcath Systems CAPS page whether the hurdle is set too high for it to make it over even with a distinguished doctor on board.
Blowing in the wind
After losing last month the legal battle it had waged against Micron (Nasdaq: MU) and Hynix Semiconductor, the market basically wrote off the remaining value in Rambus. Yet as the licensing deal on Friday with Broadcom (Nasdaq: BRCM) shows, the rumors of its death may have been a bit premature.
Yet the market may also have prematurely popped the bubbly in celebrating its return from the dead. While the two also settled their outstanding legal issues -- Rambus had sued Broadcom, too -- financial aspects of the licensing deal were revealed, and which patent technology would be covered was not disclosed. It might not be as grand as everyone is making out.
Still, for a company in which everyone had given up hope, let them party on for a while! Besides CAPS member wh00dat said it was too much of an overreaction to begin with for the market to have sold off the stock so sharply.
60% drop is fever level insanity. I jumped in at 7.17 and am already up. I think it will settle off at 8-9 the next few days and I'm looking forward to maximizing returns through options sales during a slow rise back to 12-15 in the coming months.
Tell us in the comments section below whether you think there will be more such agreements coming the chipmaker's way, and then add Rambus to your watchlist for updates on its progress.
Going into orbit
These three companies may have divergent futures despite their short-term bounces, so check out for free two companies The Motley Fool thinks have a can't-fail future. Hurry, though, because the free look is available for a limited time only.
