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Whoa! These 3 Stocks Just Trounced the Dow

By Rich Duprey - Dec 9, 2012 at 1:00PM

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These stocks just bounced higher, but are they about to make a return trip to Earth?

Better-than-expected jobs data sent the Dow Jones Industrial Average (^DJI -0.42%) 81 points higher on Friday and capped a week that saw it nestle firmly about the 13,000 mark. But with the falling unemployment rate based on some particularly ugly truths -- such as the only reason it fell was because the labor participation rate dropped to 63.6% -- expect the euphoria realized last week to be short-lived.

But some companies were able to record performances that outdid the indexes, with some even rising by double-digit percentages. Yet resist the urge to high-five everyone in the cubicles next to you. 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.

Company

% Gain

Groupon (GRPN 7.10%)

23%

Trina Solar (NYSE: TSL)

9.9%

GT Advanced Technologies (NASDAQ: GTAT)

8.6%

Opportunity lost
All anyone can really say is that Google (GOOGL 4.16%) dodged a bullet when it passed on buying Groupon, and though rumor was that it was once again considering an acquisition, it's nothing short of grasping at straws to think it will pull the trigger.

It was nothing short of hubris that led Groupon to spurn the $6 billion buyout bid, but at the time it was a media darling, because social-media companies were all the rage. Yahoo! (NASDAQ: YHOO), as well, was said to be interested, so if Google wanted to buy the grand dame of the online-daily-deals ball, it was going to need to throw in a hefty, seven-figure breakup fee, in case antitrust regulators squashed the attempt.

Groupon burnished its reputation by raising nearly $1 billion in a round of venture capital financing and then going public at $20 a share, which valued the company at $13 billion. While it would go on to hit even higher valuations in the months following the IPO, the positioning for its downfall was already written.

Copycats were flooding the market, and it had an indefensible, competitive moat. LivingSocial, ReachLocal (RLOC), Local.com (LOCMQ), even Google itself began to offer daily deals. There was also a lot of anecdotal information out there that businesses signing up for a Groupon deal will either not make the money promised or will be swamped by customers only wanting that single discount. Stickiness wasn't exactly a Groupon hallmark that drove customers to a company.

Groupon fell and fell hard, and it remains a shell of its former self. Instead of shedding its CEO and bringing in someone who could guide the company to the next level, Groupon's board affirmed its belief in Andy Mason. That, more than anything else, should convince investors that Google's not buying, not now, not ever. I expect to see Groupon's gains evaporate like its former glory and wouldn't be surprised to see its value halved again.

Solar is shining
There was no company-specific reason Trina Solar should have shot higher Friday, but the Motley Fool CAPS Solar Power sector as a whole rose 2%, with LDK Solar (NYSE: LDK) and ReneSola (SOL 0.86%) doing even better than Trina, jumping 11% and 10%, respectively. Everyone was bouncing on the news that Chinese solar shop JinkoSolar (JKS 1.22%) was getting a $1 billion handout  from the government as it selectively bets on certain players. Jinko's stock surged almost 14% on the cash influx.

With an industrywide glut still in place, falling prices, evaporating margins, and competitive energy pricing from natural gas and coal, there's little hope that any of these players will amount to much. Trina just cut its shipment guidance, along with Yingli Green Energy (NYSE: YGE).

This was also the likely reason polysilicon equipment maker GT Advanced Technologies jumped, too, but just because Jinko's got the joint jumping doesn't mean anyone else will benefit. Like Groupon, I expect the gains at GT and Trina to be blotted out soon enough, and while I've had a long-running underperform rating on CAPS on the equipment maker that I don't plan on changing, I used the occasion of Trina's bounce to also rate it to underperform. Let me know in the comments section below if you agree this new-found fame will be fleeting.

 

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$30,967.82 (-0.42%) $-129.44
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOGL
$2,265.26 (4.16%) $90.51
Groupon, Inc. Stock Quote
Groupon, Inc.
GRPN
$11.77 (7.10%) $0.78
Local Corporation Stock Quote
Local Corporation
LOCMQ
ReachLocal, Inc. Stock Quote
ReachLocal, Inc.
RLOC
ReneSola Ltd Stock Quote
ReneSola Ltd
SOL
$4.71 (0.86%) $0.04
JinkoSolar Holding Co., Ltd. Stock Quote
JinkoSolar Holding Co., Ltd.
JKS
$68.06 (1.22%) $0.82

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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