Down we go again, the markets reversing course falling several days in a row. But resist the urge to high-five everyone in the cubicles next to you just because your stock just strapped on a rocket pack. 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)
Clearwire (NAS: CLWR)
SGI (NYS: SGI)
Ann (NYS: ANN)
The market plunged 173 points yesterday, or 1.6%, so stocks that went higher, even by seemingly negligible amounts, are pretty big deals.
Higher and higher
Talk about a Cinderella story. Clearwire is the belle of the ball, though it also likely marks the end of an era.
The 4G WiMax network operator has been the backbone of Sprint's (NYS: S) system, and whatever the problems the carrier has had retaining customers, Clearwire brought its own share of troubles to the table. As fellow Fool Tim Beyers noted, a cash crunch and management turmoil have hurt business as the rival LTE technology turned heads for performance. It seemed the death warrant was signed when Sprint signed a 15-year deal with rival LightSquared for its LTE network in space.
While investors figured that meant Clearwire was getting cut loose, Sprint actually wants to bring it in even closer. The carrier entered into talks with cable operators Comcast (NAS: CMCSA) , Time Warner (NYS: TWX) , and Bright House Networks -- all investors in Clearwire -- about a financing deal that would allow Sprint to purchase the remaining equity in the network operator it doesn't already own.
Clearwire dropped a bombshell of its own earlier this month, announcing it was going LTE too. Its "LTE Advanced-ready" technology would be added to its network as management acknowledged it "is the future of mobile broadband." Although it says it will continue to support WiMax, it's obvious the writing is on the wall for the broadband system.
CAPS member dturgel suggests Clearwire has been driving the pumpkin-chariot all along:
They own WiMAX and they're adding LTE...the balance sheet should strengthen in 2012 and macro economics-well this seems to be the only industry that's going to grow in the double dip.
Let us know on the Clearwire CAPS page whether you think the latest developments mean the network operator is a real princess or just scullery maid in disguise.
The nuclear option
When you have customers with names like UK Atomic Weapons, you know you've got some important products and services to deliver.
SGI, the former Silicon Graphics supercomputing outfit, reported fourth-quarter earnings that exploded over analyst expectations While surpassing its own revenue guidance from earlier this year, it made good on its promise to turn a profit. Adjusted earnings of $0.57 a share is expected to grow to $0.60 to $0.80 a share next year.
Harnessing supercomputer processing power has become a critical and essential element for businesses and government, one which management says shows no sign of slipping. For example, as a signer of the nuclear test ban treaty, the U.K. has to rely upon computer modeling to test the safety and reliability of its nuclear arsenal so its Atomic Weapons Establishment turned to SGI for the technology and raw computing power to achieve that.
With 90% of the CAPS All-Stars rating SGI to outperform the market, it's clear they're not expecting a meltdown any time soon from the supercomputing specialist. Add SGI to your watchlist then head over to the SGI CAPS page and let us know if the numbers add up.
Secure in the knowledge
Selling women's power clothes may not be as exciting as programming a nation's nuclear arsenal, but retail Ann has shown it can be just as profitable.
The women's clothing retailer, which operates Ann Taylor stores along with LOFT (it also changed its name to the much simpler "Ann") turned in a much stronger than expected earnings report. Particularly at its LOFT division -- the retailers discount, more casual line of clothing -- Ann posted particularly strong gains with sales rising 23% from last year and comps jumping 11%.
In contrast, similarly situated New York & Co (NYS: NWY) said although revenues fell this quarter compared to a year ago, losses narrowed this quarter thanks to cost-cutting measures it implemented, but were bigger than what analysts anticipated. As a result, the market pounded its shares, dropping them 20% on Friday.
No doubt it was the recessionary environment that caused nearly one-in-three CAPS All-Stars rating Ann to believe it would underperform the broad market indexes. Because it has expanded its more affordable brand during a period when it looked like the economy was turning, the retailer has put up some pretty strong numbers.
Add the stock to the Fool's free portfolio tracker to track all the news and analysis then head over to the Ann CAPS page and let us know whether it will be able to maintain that drive.
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 reentry, 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 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.Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here.
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