Whoa! What Just Happened to My Stock?
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 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 several stocks that just hit the afterburners and see whether they're truly headed into orbit.
CAPS Rating(out of 5)
|Questcor Pharmaceuticals (NAS: QCOR)|
|ACCO Brands (NYS: ABD)|
|IAC/InterActive (NAS: IACI)|
NR = not rated.
The clock is ticking down to the debt ceiling deadline, and with each side playing a dangerous game of brinkmanship, the Dow tumbled 198 points yesterday, or 1.6%. So stocks that went higher are pretty big deals.
Higher and higher
Fear of changes to Medicare and Medicaid reimbursement policies have dogged companies across the health-care sector, from hospital operators like Tenet Healthcare (NYS: THC) to insurers such as WellPoint (NYS: WLP) .
It was also supposedly a concern for drug developers like Questcor Pharmaceuticals, whose multiple sclerosis treatment Acthar was going to face a tidal wave of rebates in the wake of Obamacare's passage, thus hurting performance. Apparently, Questcor didn't get the memo.
Acthar shipments rose 45% from the year-ago period (and up 21% from the first quarter) as prescriptions for the drug doubled, driving the pharmaceutical company's record second quarter. With the potential to expand the number of indications the drug can be prescribed for, Questcor isn't looking back or at the competition, like Pfizer (NYS: PFE) , which makes Solu-Medrol to treat MS.
CAPS member racingbold identified Acthar as the key to Questcor's future when pegging the pharmaceutical to outperform the market: "The new frontier for QCOR's flagship drug, Acthar, is the [Nephrotic Syndrome] application. If phase IV testing proves out, Acthar could be a last line of defense treatment for NS patients before dialysis."
You can diagnose its future by adding your thoughts to the Questcor Pharmaceuticals CAPS page.
Coming up short
Considering the state of global economies, there's little wonder why ACCO Brands was on the list of companies with the highest number of shares sold short on the New York Stock Exchange. As office-supply giant Staples (NAS: SPLS) has shown, there's little traction in the marketplace for pencils, paperclips, and rubber bands, and Avery Dennisoncouldn't label its own quarter a success the other day, either. So expecting ACCO to fall wasn't exactly a daring position to take.
Unfortunately for the short sellers, ACCO shredded their hopes by posting results that were much better than Wall Street anticipated. While volumes were flat and revenues were helped along by positive currency effects, profits from continuing operations doubled from last year, when tax rates were normalized. The U.K. was a particular laggard, perhaps not surprising during a time when it's not fun being a banker there, but the press release actually highlighted selling shredders as a notable high point. I could speculate about a connection with the banks' need to get rid of a lot of paperwork, but in any event, shredders helped ACCO offset a lot of the decline.
The bad business environment probably explains why nearly a third of the CAPS members who've rated ACCO thought it would underperform the market, but you can add the office-supplies specialist to your watchlist to keep tabs on whether its stock will be a staple for investors again.
A match made in heaven?
Media mogul IAC/InterActive also beat expectations yesterday as its online dating site, Match.com, saw business jump 20%, even as its investment in The Daily Beast continued to push losses higher, despite the sale of half the business to Newsweek. Losses of unconsolidated affiliates more than doubled to $8.7 million.
That hook-up probably could have used Match's six-month guarantee to find the right partner or your money back. Maybe they'll soon be surfing online cheating service Ashley Madison, which guarantees "successful affairs" or your money back. Perhaps more surprising was the success that IAC's search business, which includes Ask.com, achieved in the quarter, as revenue surged 28% in the quarter after better marketing raised its profile.
Despite the low two-star rating, 93% of the All-Star CAPS members weighing in on the media house believed it would outperform the broad market averages. Let us know in the comments section below or on the IAC/InterActive CAPS page whether you think this is a worthy matchup.
Going into orbit
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.
At the time this article was published Motley Fool newsletter services have recommended buying shares of Pfizer, Staples, and WellPoint. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.Fool contributor Rich Duprey has no financial position in any of the stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.
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