Whoa! What Just Happened to My Stock?
The markets fell big, but resist the urge to high-five everyone in the cubicles next to you just because your stock 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)
|Gramercy Capital (NYS: GKK)||****||12.8%|
|Golden Star Resources (NYS: GSS)||****||10.4%|
|Oclaro (NAS: OCLR)||***||8.9%|
With the Dow Jones (INDEX: ^DJI) index tumbling 253 points, or 2.2%, yesterday as the employment picture remains exceptionally weak, stocks that went appreciably higher are pretty big deals.
Being left as a shell of your former self apparently has a certain appeal to some investors. Troubled Gramercy Capital has been offloading its assets in a lender-driven sale of property in its realty division, and the remaining detritus is being viewed as a platform for someone to acquire.
The sagging commercial real estate market hit Gramercy last year causing it to seek extensions from lenders SL Green, Goldman Sachs, and Citigroup (NYS: C) . Those extensions were extended again in April, but they also began divvying up Gramercy's assets between them.
Yesterday's big move was the result of Gramercy transferring more than 300 commercial properties in its portfolio to lender KBS Debt Holdings with the stipulation that the remaining assets will be transferred by the end of the year. In exchange, the REIT gets out from under the rock of outstanding loans and interest, both contractual and default. In essence, Gramercy is a hollow vessel (it retains 58 properties) that someone such as a private equity firm looking to enter commercial real estate could use for its own purposes.
The analysts at Motley Fool Special Ops realized early on that although the situation for the company seemed dire, from an investment standpoint it was really a low-risk opportunity: The chance for bankruptcy was almost non-existent with lots of upside potential. That's likely the rationale behind 94% of the 364 CAPS members rating Gramercy to outperform the broad market averages.
Tell us in the comments section below or on the Gramercy Capital CAPS page whether you'd still bid on it at these prices.
Higher and higher
Gold prices jumped Friday on the horrible jobs report, the first time since 1945 that the government has reported that no new net jobs were created in the private sector. With the prospects of a QE3 program being unleashed, it's not surprising to learn that gold miners like Newmont Mining (NYS: NEM) and Rubicon Minerals (NYS: RBY) were moving higher on a day when the market crashed, but Golden Star Resources was the top gold stock because it fortuitously reported it had restarted mining at its Ghanaian Pampe deposit.
With 191,000 ounces of proven reserves, Golden Star comes out a winner if gold prices remain high, which now seems all too likely. The project, when including the mine tailings, will have cash operating costs of just $650 an ounce, helping it overcome the poor management team it had to replace at its Bogoso mine.
CAPS member WilliamCrook2003 likes its position in the African nation regardless, joining with the All-Stars members who believe it will be a true star of gold mining, 94% of whom think it will beat the Street.
Add Golden Star to your watchlist then mine the Golden Star Resources CAPS page for even more opinions about its potential.
A betting man
It's easier to see that optical networking isn't dead after all. While many assumed that the industry had given up the ghost after bad earnings reports by the likes of JDS Uniphase (NAS: JDSU) and Oplink, it turns out there's still a heart beating within.
On Thursday, Finisar reported better-than-expected results, and that was followed by Ciena turning a surprising profit. It appears a bottom has been reached in the sector, and Oclaro was ready to run. Like Ciena, it has been unprofitable over the last 12 months, so investors may be expecting an earnings surprise when it reports first-quarter results.
There might be some method in this seeming madness. Even if mobile carriers are reticent about too much capital spending right now, the growth in mobile computing and communications is going to require they upgrade their systems. But as the Fool's Anders Bylund points out, Oclaro has thus far been losing the race to Finisar and JDSU.
Wall Street is still bullish on Oclaro's long-term prospects, as is the broader CAPS community, with 88% of those rating the optical networking specialist to outperform the market believing it's seen the light. Let us know on the Oclaro CAPS page if you think it can see its way to higher growth.
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 this article was published Fool contributorRich Dupreyholds no position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of Citigroup and Gramercy Capital. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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