Whoa! My Stock Crushed the Market!
With Greece threatening world stability by taking its bailout package to a referendum, markets were in a rout globally. But just because your stock strapped on a rocket pack and went even higher, resist the urge to high-five everyone in the cubicles next to you. 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)
|Corinthian Colleges (NAS: COCO)||**||14.1%|
|Neurocrine Biosciences (NAS: NBIX)||**||16.3%|
|Jaguar Mining (NYS: JAG)||***||11.5%|
Source: Motley Fool CAPS.
With the markets falling 297 points yesterday -- or 2.5% -- stocks that went appreciably higher are pretty big deals.
Shining a light on growth
At first glance it might be hard to see why the market was so euphoric about the earnings results posted by Corinthian Colleges. There was a 23% drop in enrollment causing the for-profit educator to post revenues that were 17% lower than last year. The lower revenues in turn generated adjusted losses of $0.04 per share in the quarter, worse than the $0.02-per-share loss analysts anticipated and a big changed of fortune compared to a $0.38-per-share profit it posted a year ago.
It's obvious the misguided witch hunt the Obama administration has been on against the industry is taking its toll. DeVry (NYS: DV) reported worse-than-expected losses last week, Career Education saw its margins cut in half, and Apollo Group (NAS: APOL) saw its new student starts slashed by a third.
Yet looking ahead, Corinthian is hoping to breakeven next quarter with profits of as much as $0.35 a share for the full year coming in. That will be helped along by enrollments turning north again in late 2012.
I'll admit I'm not as hopeful as some. The persecution of profit-making businesses will be tough to counteract as the regulatory burden weighs down operations. The investment community might disagree, as 84% of the CAPS members rating Corinthian think it will outperform the broad indexes. Yet the two-star rating they've assigned it suggests they do think there are better places for your money.
Add the for-profit educator to your watchlist and let us know in the comments section below or on the Corinthian Colleges CAPS page if making money while helping others learn is an evil concept to you, too.
No generic opportunity
Hitting new milestones for its gynecological drug candidate elagolix and Type 2 diabetes treatment GPR119 allowed Neurocrine Biosciences to book revenues that nearly tripled as partners Abbott Labs (NYS: ABT) and Boehringer Ingelheim paid milestone payments to the biotech. In particular, Neurocrine received $10 million for moving elagolix into phase 2 clinical trials in uterine fibroids and another $20 million for a pre-phase 3 meeting with the FDA on elagolix's treatment of endometriosis-related pain.
Under the agreement Neurocrine signed with Abbott in June 2010, Abbott is responsible for all development, marketing, and commercialization costs of elagolix and will be entitled to a percentage of worldwide sales. Neurocrine, for its part, can receive additional milestone payments of about $500 million from Abbott if it hits certain goals.
Neurocrine is also eligible to receive up to $225 million in milestone payments from Boehringer based on the achievement of development, regulatory, and commercial goals for GPR119 as well as royalty payments on any future product sales.
Earlier this month CAPS member pchop123 thought the market had sold down the biotech's shares way too much considering the potential its therapies held, and it seems he was right on the money. Tell us on the Neurocrine Biosciences CAPS page if you think it will achieve those milestones and add the biotech to your watchlist to watch how it plays out.
Still a glittering opportunity
It wasn't just yesterday's move with Jaguar Mining that was notable, but rather the 42% climb over the past two weeks that raised investor eyebrows. The high-cost junior gold miner tumbled after it released preliminary third-quarter results a few weeks ago in which it reduced its full-year output guidance from 200,000 ounces of gold to a range of 155,000 to 163,000 ounces. Yet as the Fool's Sean Williams pointed out just as Jaguar was set to pounce, "Gold production is expected to be up 20% over last year, quarterly revenue hit a new record, and cash operating margins of $806 per ounce are also a record."
He likes Golden Star Resources (NYS: GSS) best of all, but Jaguar presented him with an intriguing value proposition. It's still down 18% this year and is off more than 26% from its 52-week high. With gold prices remaining elevated and rallying on the European crisis, the junior miner should still offer a profitable prospect.
Add Jaguar Mining to the Fool's free portfolio tracker if you'd like to dig down further into to its future opportunities.
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 Abbott Laboratories. Motley Fool newsletter services have recommended buying shares of Abbott Laboratories. 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.
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