Not even his fellow Republicans would sign onto House Speaker Boehner's so-called "Plan B" soak-the-rich option, and with its rejection not only did the likelihood of going over the fiscal cliff advance even further, but Boehner's tenure as speaker may have just come to an end too. The Dow Jones Industrial Average (^DJI 1.73%) fell 120 points on Friday, marking yet another day of 100-plus-point swings in the index.
While that sent the usual pack of financial stocks in the index lower as well, there weren't very many bright spots anywhere among the components: Tech bellwethers Intel (INTC 2.20%) and Cisco (CSCO 2.63%) were down more than 1% each, as were industrial biggies Alcoa (AA +0.00%) and Caterpillar (CAT 1.11%).
Yet the three companies I'll look at today managed to do much worse than the Dow and its lagging components, falling by double-digit percentages.
|
Company |
% Change |
|---|---|
|
Research In Motion (RIMM 2.77%) |
(22.7%) |
|
Herbalife (HLF 2.44%) |
(19.1%) |
|
Amicus Therapeutics (FOLD 0.10%) |
(9.8%) |
Now, don't go running over the cliff with them like a bunch of lemmings: This could just be a temporary situation. Let's first see whether they had good reason to fall, as panic-fueled routs can sometimes lead to excellent buying opportunities.
Short-circuiting
The pounding Herbalife is taking is relentless after hedge fund operator Bill Ackman came out publicly to announce he's shorting the stock. For three straight days, the supplements seller has seen its shares drop by double-digit percentages following accusations that the company is a pyramid scheme, with Friday's plunge being the worst after Ackman gave a three-hour presentation and set up a website detailing his charge.
Although Herbalife has said it will hold its own analyst day conference to rebut the accusations on Jan. 7, one wonders whether that will be too late. Ackman has said he expects the stock to go all the way to zero, and at the rate it's falling, that could happen sooner rather than later.
The presentation and supporting data the hedge fund operator offered is pretty damning. Yes, Ackman had to make some assumptions, but it describes them as conservative. No doubt Herbalife's rebuttal will say he's way off base on them, but multilevel marketing companies in general walk a very fine line between a business and a pyramid scheme. It will be interesting to see how the nutrition supplements seller will counter this attack, because it is taking down other MLMs in the process. Nu-Skin Enterprises (NUS 2.00%) tumbled 14% yesterday and 25% over the past week, while Blyth (NYSE: BTH) fell 8% on Friday and was down 16% over the past five days.
Out of service
Forget about Research In Motion's new operating system due out next month: The BlackBerry maker may have just cut off the revenue stream that provides it with the profitability to survive. At least that's what the markets were thinking Friday, when they sold off the stock after it announced it had eliminated service fees for certain subscribers. Service fees accounted for more than a third of its revenues last quarter, or $982 million.
With RIM reporting that it had 1 million fewer subscribers in the quarter, there was a lot of concern that these two forces could overshadow whatever chance of recovery it had going for it. It was enough to make everyone forget it just reported earnings that beat analyst expectations while also settling a patent infringement case it had going on with Nokia (NOK 3.80%). Just as the smoke was starting to clear on its future, it filled the room with fog.
Amicus brief
Shares of Amicus Therapeutics folded after the drug it was developing with GlaxoSmithKline (GSK 0.18%) to cut fat in kidney blood vessels in Fabry disease patients failed to achieve its goal in late-stage clinical trials. While the stock was down almost 10% on Friday, it had already lost nearly half its value the day before when the news was announced.
About the best thing Amicus has going for it is that Glaxo increased its stake in the biotech to about 20% from 14% earlier this year, suggesting it still has confidence in the remainder of its drug pipeline even though the failed therapy, Amigal, was its most advanced treatment. Considering the pharma giant has made some big acquisitions lately, including the purchase of Human Genome Sciences, the fact it was still putting money into biotechs like Amicus and Theravance (Nasdaq: THRX), where it also increased its holdings, makes it possible that its shopping spree isn't done yet.
