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)
|MAKO Surgical (NAS: MAKO)|
|Neoprobe (NAS: NEOP)|
|Northern Oil & Gas (NYS: NOG)|
Just like that, the markets bounced back, jumping 430 points, or 4%. It doesn't get us back above "correction" levels, but it's a start. Whether it holds is another matter. So stocks that went higher, even marginally, are remarkable, let alone pretty big deals.
Higher and higher
Robotics is the future of surgery, with companies applying technology to all aspects of the operating room. From industry innovator Intuitive Surgical (NAS: ISGR) , whose DaVinci system translates a surgeon's hand movements into micro-movements on the instrument inside a patient, to Hansen Medical's (NAS: HNSN) 3D catheter guidance system, robotics are changing the way surgery is performed.
The biggest stumbling blocks have typically been costs (DaVinci machines, for example, can run into the tens of thousands of dollars) and tightened controls of capex spending at hospitals. A noticeable thaw has taken place in hospital spending, which helped revenues at MAKO Surgical, whose devices helps surgeons perform knee and hip replacements robotically, jump 81% year over year.
The initial concern with its results probably stemmed from widening losses, as higher R&D costs along with greater sales and marketing expenses were identified as the culprit. But as more devices are put in place and procedures performed, revenues for services will continue to grow, too. Right now they account for just 8% of revenues, but that's up from 3% a year ago.
CAPS member kbdunn9 says an aging population will put MAKO's technology right into the demographic sweet spot.
Robotic knee and hip surgery. Should be quite lucrative with all the active baby boomers out there....and it's on sale today. I doubled down on it.
Head to the MAKO Surgical CAPS page and get a leg up on what other investors are saying about this robotics play.
Calling all bulls
Biotech Neoprobe has been caught between a rock and a hard place. On one hand, it has critics saying its Lymphoseek marker won't get FDA approval because it's not following current standard-of-care testing procedures, and on the other it's fending off a hedge fund that is actively trying to make the stock fall to achieve a profit.
Neoprobe answers its critics by pointing out the current standard of care -- a blue dye (VBD) and sulphur colloid combination -- is actually an off-label usage, so the FDA won't allow it to test against it. And it has answered the hedge fund's "citizen petition" by alleging that it is full of misstatements and half-truths.
As loathsome as MSMB Capital Management's strategy appears, it's not uncommon. Even big pharmaceuticals like Johnson & Johnson (NYS: JNJ) have filed petitions to block a rival's drug. I think it's the fact that it's a hedge fund short Neoprobe's stock that sticks in the craw of investors.
While 72% of the CAPS members rating Neoprobe agree with the long thesis for the biotech, it's a different story with All-Star members, who by a 3-to-1 ratio expect it to come up, well, short. What appears to be happening instead is that it's stealing share from its rivals. Add the biotech to your watchlist, and then head over to the Neoprobe CAPS page and let us know whether you think it will make short work of the short sellers.
Drilling deep ... or not
Northern Oil & Gas lets others do the heavy lifting for it, and it's starting to pay off. Rather than work the Bakken region itself, Northern buys up property and lets the likes of EOG Resources (NYS: EOG) and Continental Resources do the actual drilling, taking a partial interest in the wells themselves.
Oil and gas sales tripled in the second quarter, and production volumes were up 132%, which helped account for the stock's rise. But some notable critics have attacked Northern for its corporate-governance practices, as well as the potential for unsustainable growth. Bakken wells tend to get depleted much faster than wells elsewhere. CAPS All-Star Clawhammer08 asks why an investor would dip a toe in here: "There's tons of money to be made legitimately in this particular shale formation, why put your chips on this horse? There are so many other players in this shale field, and players with good, solid accounting pasts as well."
Still, the CAPS community has been enthusiastic about Northern's potential, with 90% of those rating it believing it will outperform the market averages. Let us know in the comments section below or on the Northern Oil & Gas CAPS page whether you think this is a driller worth digging into.
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 The Motley Fool owns shares of Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of MAKO Surgical, Intuitive Surgical, and Johnson & Johnson and creating a diagonal call position in Johnson & Johnson. 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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