Although earnings seasons got off to a rocky start the other day, yesterday featured enough good news to propel the Dow higher by 125 points, or 1%. Over two days, the index is up more than 200 points, but here are three stocks that did even better than the Dow.
|
Company |
% Gain |
|---|---|
|
Cliffs Natural Resources (CLF 2.06%) |
7.1% |
|
3D Systems (DDD +1.59%) |
5.7% |
|
Thompson Creek Metals (TC +0.00%) |
5.6% |
Resist the urge to high-five everyone in the cubicles next to you, however. Smart investors won't celebrate until they know why their stock surged, because without a fundamental basis for the bounce, these stocks could just as quickly make the return trip down.
Steel yourself for volatility
Natural resources stocks had a good day yesterday, broadly speaking, as the Motley Fool CAPS Metals & Mining sector rose nearly 2%, so the better-than-average gains recorded by Cliffs Natural Resources and Thompson Creek Metals isn't so surprising. Both have been beaten down recently, with Cliffs down 60% so far this year and Thompson Creek off 25%.
Pricing has been one of the problems confronting them, as iron ore has been buffeted by the weak Chinese economic recovery that dampened demand for steel while lower molybdenum prices have pressured Thompson Creek. The miner said it was cutting production in a bid to save cash. The new stimulus spending program China announced last month gave hope to investors generally that there would be more than just an uptick in demand for metals and ores, but such largesse doesn't flow quickly or evenly, and whatever excitement there had been has seemingly dissipated.
Yet with prices in iron ore recovering, I'm looking for Cliffs to rebound smartly. According to Rio Tinto, China will still be a center for iron ore demand, though not at rates previously witnessed. But prices should be better as many Chinese miners are cutting production because it's unprofitable at current levels, with even BHP Billiton reining in expansion plans.
Molybdenum's firmed up a bit too, but Thompson Creek has a higher cost structure in place that doesn't lend itself so easily to getting good traction right away. Regardless, I think it's still a good long-term play and could be an exciting investment if it can get back to double-digit margins again.
Let me know in the comments box below if you think these miners can dig deep to find the levers to pull for growth.
The third dimension
The Consumer Electronics Association says 3-D printer sales will hit $5 billion in five years, a 30% compounded annual rate of growth from the $1.7 billion level it currently sits at. That will require a far greater penetration in the marketplace than currently exists, and will demand that prices continue dropping. Investor's Business Daily previously pegged the long-term growth rate at 16% through 2020.
3D Systems is poised to break through the $1,000 price barrier with its printers, a milestone the industry will celebrate, as I've noted in the past that it was at that price point that Hewlett-Packard (HPQ 0.65%) moved the inkjet printer to the fore and acquired massive market share in the process. HP previously had a manufacturing and distribution agreement with 3-D rival Stratasys (SSYS +0.24%), but the agreed to go their separate ways at the end of the year.
That could give 3D Systems the leg up it needs to keep driving the tech revolution down to the consumer level. Earlier this year I rated 3D to outperform the market on CAPS, the 180,000 member-driven investor community that transforms informed opinion in ratings of one to five stars. My bullish CAPScall on 3D has witnessed the stock jump 130% at the same time the market indexes have risen by just a tenth of that gain.
But you can tell me in the comments box below whether you think it will continue enjoying eye-popping returns like that in the future.
