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)
Biolase Technology (NAS: BLTI)
Cheniere Energy Partners (NYS: CQP)
Cree (NAS: CREE)
Easy come, easy go. What the market giveth, it can just as easily taketh away and it did, falling yesterday more than 500 points -- again -- or 4.6%, one day after soaring 430 points. Volatility, thy name is the stock market. So stocks that went higher, even marginally, are remarkable let alone pretty big deals.
Higher and higher
Last month I pointed out that Biolase Technology was merely suffering from a timing issue, that despite expecting second-quarter revenues to double, a change-order request by Henry Schein right at the end of the quarter prevented shipments. Not to fear, I soothed -- the dental-laser maker would have them out in the third quarter.
Good to its word, Biolase reported that it has completed the full order, worth $9 million, ahead of the Aug. 25 deadline and removed the liability from its balance sheets. It's had a number of issues with Henry Schein over the past few quarters and subsequently renegotiated its contract with the medical-supplies distributor. Having regained full rights to its products, Biolase will be selling them directly and through multiple independent channels.
Its results for the second quarter, which ended in June, show that revenues did double, with sales in the U.S. picking up and the first orders for its new dental-imaging devices being received. With its stumbling blocks cleared, Biolase looks ready to take on aesthetic-laser maker Palomar Medical Technologies (NAS: PMTI) , which suffered some challenges this past quarter, and Syneron (NAS: ELOS) , which is proving to be a worthy rival.
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.
Head to the Biolase Technology CAPS page and tell us whether you think the stock will give investors a reason to smile.
Calling all bulls
Although natural gas supplies have come down from their record highs, they're still in overabundance. But Cheniere Energy Partners -- a subsidiary of Cheniere Energy (NYS: LNG) -- has a unique opportunity to use its Sabine Pass terminal in Louisiana to export supplies to global markets.
Adding liquefaction capabilities to this receiving terminal could help natural gas companies open new markets, while introducing a modicum of price stability and encouraging new exploration, though that's never seemed to be a problem in the industry.
The problem, though, is that it all remains years away. At the earliest, Cheniere says exports could commence from the terminal in 2015. That's just a long time from now, and it's possible anything could happen by then. It still needs financing commitments, which it plans on securing in the second half of this year, and won't begin construction until next year. While plans call for up to four LNG trains, it wants to have some long-term contracts in hand for them before committing to them.
It does pay investors to a dividend that's currently yielding 13% -- certainly a handsome check while you wait for those plans to mature. But even though CAPS member latinoeconomist finds it tempting, chasing yield is always a risky business.
Add the natural gas supplier to your watchlist, and then head over to the Cheniere Energy Partners CAPS page and let us know whether working on the railroad will eventually pay off.
Drilling deep ... or not
It's possible the dim bulbs in Congress may yet reverse the ban on the incandescent bulb, as resistance to forced adoption of the pigtail compact fluorescent remains. Yet LED lighting adoption, which is really the real next stage in lighting -- CFLs are more akin to a transition technology -- is accelerating. Apparently lighting the way ahead is industry leader Cree, which reported earnings that exceeded analyst expectations.
Revenues and earnings were down from the year before, but Wall Street had expected Cree to do worse. That put it in better stead than rival Aixtron (NAS: AIXG) , which disappointed the market as its margins compressed. China is poised to become the largest geographical component of its revenues, but delays in a Chinese factory's construction, coupled with customers there who are choosing lower-priced products, led to margin compression at the LED shop.
CAPS member there4im sees the growth in LED lighting as driving higher revenues for Cree: "From a long term view, the move to LED lighting is just getting started. Even with lots of competition and declining profit margins, I still recommend CREE because I think the top line sales figure will grow steadily for years to come."
Let us know in the comments section below or on the Cree CAPS page whether you think this is a shining light of this industry.
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 thisarticle was published 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 owns shares of Aixtron but has no financial position in any of the other stocks mentioned in this article. You can see his holdings holdings. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.