Whoa! What Just Happened to My Stock?
The markets fell again after putting together two strong days in triple-digit territory, but resist the urge to high-five everyone in the cubicles next to you just because your stock strapped on a rocket pack instead. Smart investors won't celebrate until they know that upward leap 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 a few stocks that just hit the afterburners, and see whether they're truly headed into orbit.
|Caliper Life Sciences (NAS: CALP)||***||41.1%|
|Silvercorp Metals (NYS: SVM)||****||10.3%|
|BioSante Pharmaceuticals (NAS: BPAX)||***||9.9%|
With the Dow Jones Industrial Average (INDEX: ^DJI) falling 119 points yesterday, or 1%, stocks that went appreciably higher are pretty big deals.
You can tell whether a company is a serial acquirer -- buying company after company after company -- by comparing the goodwill line on its balance sheet to its total assets. Anything above 10% and the company enjoys going on spending sprees. PerkinElmer (NYS: PKI) is what you'd call a binge buyer.
Over the last two years, it has bought nine different companies and just announced it is buying its tenth, Caliper Life Sciences, a maker of molecular imaging and detection technologies for life sciences research and diagnostics. PerkinElmer's goodwill-to-assets ratio is 50%.
At $600 million, or $10.50 per share, a 42% premium to Caliper's closing price, the deal is PerkinElmer's biggest to date. At 25% of PerkinElmer's market cap, Caliper is going to be a big pill to swallow, which might be why the market got indigestion and sent PerkinElmer's shares down.
The two companies otherwise seem a natural fit, and after sapping about $0.05 a share from PerkinElmer's earnings this year, management expects Caliper's line of molecular imaging and genomic detection technologies to add as much as $0.20 per share to its bottom line in 2013.
Caliper was flying below the radar of most of Wall Street and Main Street, and while three-quarters of the CAPS members rating it believed Caliper could outperform the broad market averages, All-Stars were far more supportive, with just one thinking it would underperform. Let us know in the comments section below or on the Caliper Life Sciences CAPS page if you think this is a good deal for shareholders.
Higher and higher
Despite their bad reputation, short-sellers perform a valuable service to the investing community. While an allegation of fraud is difficult to accept when your stock plummets precipitously in the aftermath, the fact is that the truth will out and an otherwise sound company will likely recover. It only remains for investors to not panic and lose their heads.
Such is the case with Silvercorp Resources, which revealed it had received an anonymous letter claiming the Chinese miner was a fraud, and saw its stock tumble 10% in the process. Along with the company, which released an unprecedentedly detailed refutation of the allegations, my Foolish colleague Christopher Barker helped set the record straight for investors. The stock recovered lost ground.
Not only had Silvercorp been maligned, but Great Panther Silver (NYS: GPL) and Yongye International (NAS: YONG) , too. All three recovered from the initial scare when the charges proved baseless, though their subsequent performance suggests there might be operational issues at play rather than fraud. Yongye is down 35% from its highs and Great Panther is off 30%. While Silvercorp is 44% below its 52-week high, it has returned to the level it traded at before the specious allegations surfaced.
The point is, don't shoot the messenger. Even if it's a total fabrication, the incident could give you a chance to buy more shares at an excellent discount. When the truth comes out, you can thank the short-seller for your profit.
CAPS member TonysPicks99 says investors need only wait until the dust settles before Silvercorp will begin its march higher again. Add the silver miner to your watchlist then dig deeper on the Silvercorp Resources CAPS page.
A betting man
There was no specific news that drove BioSante Pharmaceuticals shares higher yesterday, but with a three-pronged attack on getting its female sexual dysfunction treatment LibiGel to market, investors might be expecting good news.
BioSante is expecting to report efficacy data before the end of the year, as well as safety data, then it can submit LibiGel to the FDA for approval. It's in phase 3 trials now and could have the market all to itself if approved, since the FDA shot down Procter & Gamble's (NYS: PG) bid to release a testosterone patch several years ago and Boehringer Ingelheim dropped flibanserin.
StockDocStan believes BioSante is one of a handful of biotech stocks worthy of consideration:
I cannot resist the potential, so I am parking my money in a good basket of small cap biotech picks. This is the sector to be in for the next 5 years in a big, big way. Only picking the stocks in this sector with the brightest potential.
You can add BioSante Pharmaceuticals to your watchlist and have all the Foolish news and analysis aggregated for you in a single place.
Going into orbit
It pays to start your 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 reentry, or off to infinity and beyond.
At the time this article was published Fool contributor Rich Duprey owns shares of Great Panther Silver, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Yongye International. Motley Fool newsletter services have recommended buying shares of Procter & Gamble and Yongye International. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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