Please ensure Javascript is enabled for purposes of website accessibility

Whoa! These 2 Stocks Had Healthy Returns Yesterday

By Rich Duprey - Apr 2, 2013 at 8:13PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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

After a big run-up in the Dow Jones Industrial Average over the past three months, the index took a small breather yesterday and inched down five points as Hewlett-Packard, the stock with the biggest gains so far this year, gave up more than 2%. That was offset, though, in large part by UnitedHealth Group, which tacked on a 3% gain and kept the Dow from falling further.

Managed-care providers were all given a rousing boost after Humana (HUM -4.66%) reported that based on its assessment of the Centers for Medicare and Medicaid Services ratings situation, there will be a 3.4% increase in premiums instead of the 2.2% decrease previously expected. Humana's stock soared 8.6%, while other providers, such as Aetna, jumped more than 2%.

Yet some stocks did even better than the managed-care companies, surging by double-digit percentages, though you should still 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.

Choking on the tailpipe
Precious metals had a mixed day, with silver falling, gold remaining essentially unchanged, and platinum and palladium closing higher. The EPA announced on Friday its new emission-control proposals, recommending its Tier 3 standards to reduce tailpipe and sulfur emissions.

Because the primary usage of platinum and palladium is in an auto's catalytic converter system, it's not surprising that platinum metals group prices went higher, but it might cause some head-scratching among investors viewing the stock-price reactions of the two principal miners of the metals -- North American Palladium (PALDF), which soared almost 21% on the day, and industry peer Stillwater Mining (SWC), which fell almost 2%.

Considering that the latter counts Ford (F -5.54%) among its biggest customers and the auto industry is said to be in favor of the EPA's proposed rules (while the petroleum industry stands opposed to them), you would expect Stillwater to enjoy the bigger bump. However, I think it has to do more with NAP being the industry pure-play here.

As I've recounted several times and most recently just two weeks ago, because Stillwater is diluting its exposure to PGMs with its gold mine acquisition -- much to the consternation of certain shareholders, by the way -- it is North American Palladium that benefits most from the metals' appreciation. Now NAP has experienced some delays at its Lac des Iles mine, and costs are going to rise in the near term, but with the mine expected to be fully operational later this year, it will be able to capture the benefits of higher prices -- and, presumably, the stricter emissions controls.

With platinum and palladium prices closing lower today, though, don't be surprised to see NAP give back some of yesterday's gains.

Charging forward
Motors (TSLA -6.80%) also raced ahead yesterday, rising 16%, after achieving first-quarter profitability. I've been something of a bear on the luxury electric-car maker, impressed with the vehicle it produces but skeptical of its long-term viability. And while it made it into the black as company founder Elon Musk promised, the achievement is much ado about nothing, and because the preannouncement didn't include any hard and fast financial data, there's little to go on to understand how it achieved it.

Sales appear to be strong, doubling in the first quarter the number sold in the fourth, but I'd caution that the news that the company won't be producing the cheaper Model S anymore could be a yellow flag for the carmaker.

Tesla said only 4% of its customers chose the lower-end car, making it uneconomical to continue producing, so it'll go with just its higher-end version and will include the Supercharger upgrade package in it. By doing so, however, Tesla is narrowing its market in what's already seen as a limited field, so whether its profitability can be maintained -- assuming it was achieved without financial gymnastics to begin with -- is still a big question mark.

The stock has achieved new highs, but I'm not convinced that this carmaker is a keeper just yet.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Ford Motor Company Stock Quote
Ford Motor Company
$12.78 (-5.54%) $0.75
Tesla, Inc. Stock Quote
Tesla, Inc.
$709.81 (-6.80%) $-51.80
Stillwater Mining Company Stock Quote
Stillwater Mining Company
Humana Inc. Stock Quote
Humana Inc.
$420.04 (-4.66%) $-20.55
North American Palladium Ltd. Stock Quote
North American Palladium Ltd.

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.