Stocks Shaking the Investment World
Some stocks are one-hit wonders, making a big splash when they first appear, then quickly fizzling into obscurity or oblivion. But for other stocks, that initial big move is only a preview for even bigger and better gains to come.
Today, we're listing a pair of stocks that made some of the biggest upward moves over the past month -- despite the incredible volatility in the market -- and we're pairing them with ratings issued by our Motley Fool CAPS community. The higher each stock's rating, the greater CAPS members' faith in that company's ability to keep on beating the market.
1-Month % Change
CAPS Rating (out of 5)
|Sears Holding (NAS: SHLD)||64.9%||*|
|VIVUS (NAS: VVUS)||61.2%||**|
Source: FinViz.com. One-month percentage change from Feb. 8 to March 9
While you were out, the markets rebounded, but they may turn tail again if Europe's fragile financial system falls apart. So before we get shaken out again, let's see why the CAPS community thinks some of these companies might continue to outperform the market.
Desperate times, desperate measures
The Great Winnowing is under way at Sears Holdings. Chairman Eddie Lampert is not only selling off underperforming stores, but similar to calving off Orchard Supply, he'll be spinning off his Hometown hardware stores in an effort to raise some $770 million in cash.
While the markets are supporting the move by raising the stock price over 150% so far this year, it should be recognized that Lampert's previous minimalist efforts at rejuvenating the Sears and Kmart brands were a failure. Overshadowed by the spinoff hoopla was the latest quarterly results where sales fell 4%, comps were down 3.4%, and a year-ago operating profit was turned into a huge loss.
There is little to no value left in Sears itself. It has lost the battle and the war to Wal-Mart and Target, and the only thing Lampert has left is to raze whatever productive assets he can find.
I don't know that I'd short the stock here, since markets can be irrational for extended time periods, but I'd be careful buying in, too, because the realization will soon dawn that all that's left of Sears Holdings will become an empty shell. As CAPS member MajorBob04 notes, the assets sales are only a temporary salve:
Selling real estate provides a short-term boost. But long-term they still haven't fixed the revenue growth and profitability problem.
I've already marked Sears to underperform on CAPS, but tell us in the comments section below whether you agree Lampert's reign at Sears has been a disaster, then add it to your watchlist to see how it plays out.
Weight loss in a pill -- without nasty side effects -- is what all of us couch potatoes are looking for. VIVUS has given us hope that it will succeed in our fight against fat without our having to actually eat right and exercise.
The biotech reported that an advisory panel recommended 20 to 2 that its weight-loss drug, Qnexa, be approved by the FDA. While the market fattened up VIVUS' stock, more than doubling its value before paring back a lot of those gains, I'm mindful of the FDA's capriciousness and its tendency to go its own way, particularly when it comes to weight-loss drugs. We've seen it before with VIVUS, and time and again with rivals Arena Pharmaceuticals (NAS: ARNA) and Orexigen Therapeutics (NAS: OREX) when their own weight-loss drugs got rejected. Qnexa may be the exception that proves the rule, but I'm not counting on it until I see the final FDA decision.
Of the CAPS All-Stars who made calls on VIVUS, 27% believe the company will still underperform the market. The All-Stars undoubtedly side with HoldThatWinner, who thinks fat loss in a pill is a losing proposition:
I don't care what they say. Nothing beats good ole fashioned exercise (and staying away from the Quad Burger over at Earl's).
Add the biotech to the Fool's free portfolio tracker and tell us on the VIVUS CAPS page if you think it will eventually collapse under the weight.
Shake, rattle, and roll
These two stocks shook the market this past month, but the Fool has found one company that's digging up massive profits and is likely to continue to do so if the markets become rattled. Roll on over to get your free copy -- but hurry, because it's available only for a limited time.
At the time this article was published Fool contributor Rich Duprey holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Wal-Mart. Motley Fool newsletter services have recommended buying shares of and creating a diagonal call position in Wal-Mart. 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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