Resist the urge to high-five everyone in the cubicles next to you. Your stock may have just strapped on a rocket pack and taken off for the moon, but smart investors won't celebrate until they know that move up was justified. Without a fundamental basis for the bounce, these stocks can quickly make the return trip down.
Is now the time to lock in profits, or is this just the first step toward even higher valuations down the road? Let's examine several stocks that just hit the afterburners and see whether they're truly headed into orbit.
|
Stock |
CAPS Rating |
Tuesday's Change |
|---|---|---|
|
J. Crew Group |
*** | 16.8% |
|
Uranium Resources |
** | 12.8% |
|
Uranerz Energy |
* | 11.9% |
The market tumbled 142 points yesterday, or 1.3%, with the military action on a Korean island. But stocks that went significantly in the other direction despite the chaos are big deals.
The devil's in the details
It's doubtful that CAPS members had any inside information when they picked J. Crew Group as a stock ready to make a big run last month. More likely its attractive position in the retail space was not going unnoticed. Just yesterday, private-equity investors TPG Group and Leonard Green & Partners offered $2.86 billion, or $43.50 per share, to take J. Crew private, following a trend with other distressed retailers.
According to the researchers at Dealogic, there have been more than 250 retail buyouts this year valued at more than $37 billion. That figure was as of July 2010, so tack on some more billions with the recent takeovers.
Leonard Green is also interested in taking BJ's Warehouse private as the retailer struggles to compete against Wal-Mart's
It's always possible that a higher bidder for J. Crew will come in or the deal will fall through. Let us know on the J. Crew Group CAPS page whether you think this is a done deal.
Making it to the big time
It sounds bizarre, but the incident on the Korean peninsula might be serving as a catalyst for the uranium sector. It's estimated that Pyongyang has 2,000 centrifuges capable of producing fissile material for nuclear bombs spinning away in its laboratories. With hostilities flaring up again, perhaps the thought that the dictatorship is putting a premium on buying uranium is helping shares of Uranium Resources and Uranerz Energy. Iran is apparently emboldened, too, by North Korea's success in developing its nukes.
Although the CAPS uranium sector beat the broader market's negative performance yesterday, it includes miners like Rio Tinto and BHP Billiton that don't have uranium as their primary output. Those stocks were off around 4%. Interestingly, other uranium miners were mixed: Cameco
CAPS All-Star rfaramir cites growing uranium demand as a reason to expect Uranerz shares to rise, while 86% of the CAPS members rating Uranium Resources believe it will outperform the market.
Uranium Resources certainly benefited from some positive developments recently, including settling a legal dispute over its New Mexico project, regaining listing compliance with the Nasdaq exchange, and Cameco boosting production forecasts. The U.S. Supreme Court also cleared the path for it to gain its Nuclear Regulatory Commission license. Shares have been riding high.
You can keep track of Uranerz's progress by adding it to your watchlist, and let us know on the Uranium Resources CAPS page whether military aggression is a valid catalyst for aggressive growth.
Going into orbit
Just because your stock has taken to the stratosphere doesn't mean it won't lose altitude. Markets are known for overreacting. A closer look at what has happened to your stock can give you an edge over other investors who merely follow the market's lead.
That's why it pays to start your own research on these stocks on Motley Fool CAPS, where you can read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from the stock's CAPS page. Then you can decide for yourself whether your stock's headed for re-entry, or off to infinity and beyond.
