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)
|Synchronoss Technologies (NAS: SNCR)|
|L&L Energy (NAS: LLEN)|
|Radian Group (NYS: RDN)|
The debt-ceiling agreement did nothing to stabilize the markets, and in fact it sent them falling further faster as data shows that the economy is weakening substantially. The stock market fell 266 points, or 2.2% on Tuesday. So stocks that went higher are pretty big deals.
Higher and higher
When investors hear about the explosive growth of mobile communications, it's usually the handset makers, mobile chipmakers, or operating-system developers that garner the greatest amount of attention. Perhaps more investors should follow those who invested in Synchronoss Technologies and its process of activating mobile services, with Synchronoss piling up revenues as connected devices fly off the shelves. Revenues in the latest quarter surged 47%.
Synchronoss has contracts with most of the major carriers -- and even cable providers -- but AT&T is its largest customer, accounting for 62% of all revenues in 2010. With connected devices such as phones, laptops, tablets, and GPS devices proliferating, giving the consumer greater control over the activation process right from the device itself reduces a company's service calls. It's a value proposition more companies are taking advantage of.
The competition doesn't have the same focus as Synchronoss. CSG Systems was, until a recent acquisition, focused primarily on the cable and satellite markets, with Comcast as its biggest customer. Its latest quarterly results were hurt as DISH Network received a big discount for extending its contract. NeuStar (NYS: NSR) saw its expenses far outpace revenue growth.
It's not surprising, then, that all 10 analysts covering Synchronoss think it will outperform the broad market averages and all but one of the nearly 150 CAPS All-Stars rating it agree. But you can further activate the discussion by adding your thoughts to the Synchronoss Technologies CAPS page.
Coming up short
Chinese coal miner L&L Energy is bouncing around again, as concerns over its finances continue to buffet the stock. Earlier this year, shares of L&L sank after accusations of fraud surfaced against peer Puda Coal (that stock no longer trades on U.S. markets), only to rebound as investors figured it wasn't an industrywide problem. The questions arose about L&L's own finances at the end of May, sending the stock into a tailspin once again.
Now it's happening yet again as a whole host of questions crop up, ranging from who really owns L&L's mining assets to how it can be more profitable and efficient than other miners, from Arch Coal (NYS: ACI) to Patriot Coal (NYS: PCX) , even accounting for geographic differences. The stock plunged 16% on Monday, only to rise by a like amount yesterday as investors once again shrugged off worries, perhaps choosing to focus on its expansion plans in the United States.
There's a large amount of suspicion in the CAPS community about L&L, since more than a quarter of the All-Star members rating the stock believe it will underperform the broad indexes. If there are too many questions yet to be answered before buying the stock in real life, add L&L Energy to your watchlist to keep tabs on how it responds to the new allegations.
Ensuring a positive outcome
Well, it's better than nothing, and considering that derivative investments punched such a big hole in Radian Group's finances last year, the nearly $200 million contribution they made this time around helped push the mortgage insurer to a profit.
Radian saw delinquent loans fall for the sixth consecutive quarter, so it set aside less for loan losses, which helped drive expenses down. Still, it did pay out significantly more in claims than it did a year ago, though management thinks the situation has finally peaked and will begin trending down.
That's exactly the outcome CAPS member jnuetzmann expected earlier this year when weighing in on Radian's prospects: "Delinquencies will tail off and new policies being written now are extremely conservatively underwritten and will perform well over time."
Radian's results didn't extend to peers PMI Group (NYS: PMI) , which fell 8%, or MGIC Investment, which was down 1% on the day.
Let us know in the comments section below or on the Radian Group CAPS page whether you think the mortgage insurer still radiates confidence.
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 AT&T. 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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