The markets moved higher Tuesday as traders apparently think China can endlessly stimulate its economy without repercussion, but the government's own news outlet, Xinhua News Agency, says there aren't any plans for another massive stimulus in the works. That ought to make the traders gloomy again.
Yet some stocks were going even higher Tuesday, strapping on rocket packs and turning in double-digit percent increases. Resist the urge to high-five everyone in the cubicles next to you, though. Smart investors won't celebrate until they know why their stock surged, because without a fundamental basis for the bounce, these stocks can quickly make the return trip down.
Getting left back
Analyst opinion can change on a whim, and while Fools will generally ignore their game of buy-sell-hold, it's nonetheless true that their prognostications can still move a stock. Chinese cell-phone-chip designer Spreadtrum Communications
After being weighed down by other analysts' opinions seeing the chip maker losing market share, Spreadtrum was able to embarrass them with better-than-expected earnings and new guidance that was more upbeat. Of course, part of the gloom was Spreadtrum's own dour outlook earlier in the year, but China Mobile
The day before analysts at Nomura raised their rating on it for similar reasons, but I'm not convinced yet Spreadtrum is the buy the analysts say it is. The chip maker has previously said margins will be pressured as the year wears on, and while China Mobile is Asia's biggest wireless company, China Unicom
The lead and the benefit of Spreadtrum's aligning itself so closely with China Mobile may soon dissipate. Yet CAPS member xBubbaGumpShrimp thinks just the size and market opportunity will allow Spreadtrum to outperform: "China has a growing market for smart phones and will continue to grow," presumably even if China Mobile becomes the No. 2 player in 3G.
You can add the Chinese chip maker to your Watchlist as well as tell me in the comments section below or on the Spreadtrum Communications CAPS page if you think there's room enough for many players to win.
Credit where it's due
It pays to speak up. When Vaalco Energy
You have to give credit to Vaalco's management, who responded specifically to this unfavorable recommendation and lowered the number of shares to 3 million. The board also changed the definition of when a change of control in the company occurs from being approved by shareholders to the deal actually being consummated. Considering they could have dug their heels in on this, Vaalco's board is to be commended and the market responded by sending its shares 13% higher.
Vaalco has been plying the waters off Africa's west coast for some time and was recently granted an extension by Angola to find a partner (it believes it may have found one) and further explore its options in the Kwanza basin. It also received an extension in Gabon where it's working with Total
CAPS member TheAccidentOf85 says it needs to go beyond Gabon before it will be able to achieve the growth that is expected: "This stock is cheap and I think it stays cheap for a while. Growth needs to happen outside Gabon for this stock to take off. Buy the dips and sell the rips on this one for a bit."
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