Whoa! My Stock Just Crushed the Market!
Markets have been more volatile than ever lately. So if your stock strapped on a rocket pack and went 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)
|Vulcan Materials (NYS: VMC)||***||15.3%|
|FuelCell Energy (NAS: FCEL)||**||14.7%|
|Broadwind Energy (NAS: BWEN)||**||13.2%|
Source: Motley Fool CAPS.
The Dow tumbled 163 points yesterday, or 1.3%, so stocks that went appreciably higher are pretty big deals.
Rising from the rubble
The construction industry has been crushed into the gravel by the recession, and though there's no sign yet that it's poised to rise, Martin Marietta Materials (NYS: MLM) thinks that by joining with Vulcan Materials the two can capitalize on the growth that will come. It has launched a $4.7 billion all-stock hostile takeover bid of its rival after a year of negotiations ground to a halt. The two companies have dallied with the prospects of a merger for nine years, but nothing's ever come of it.
There's some sense in Martin Marietta's proposal. Together, they could save as much as $250 million in operating costs annually, and with both dependent upon highway projects, they'd no longer be at loggerheads of funding. According to Vulcan, diesel costs rose 40% year over year, while liquid asphalt was up 20%, hurting quarterly earnings. The combined company would own 15% of the U.S. construction aggregates market.
CAPS member glake1 opportunistically picked Vulcan last week to outperform the market, believing it is a well-run company, joining with the 91% of the 500 or so other members who also back this construction giant. Add Vulcan Materials to your watchlist to see whether it can build something still.
This past May should have marked a turning point for power plant maker FuelCell Energy. That's when it reported receiving an order from steel producer POSCO (NYS: PKX) for 70 megawatts of fuel-cell kits, worth $129 million over two years. It supplied 2.8 megawatts of its kits for the project this past October, and it just won a contract with Spain's Abengoa to supply the equipment for its biogas projects.
But the deals haven't been enough to lift FuelCell's stock by much. Shares still trade 60% below their 52-week high even after yesterday's jump. Of course, Ballard Power (NAS: BLDP) remains similarly depressed. United Technologies, which owns UTC Power, has fared better (down 19%), but then again it's a more diversified manufacturer.
CAPS All-Stars are only slightly leaning in favor of FuelCell beating the Street, with 54% giving it the thumbs-up. But put its stock into the Fool's free portfolio tracker and see whether the growing list of contract wins turns things around.
Blowing in the wind
After carbon fiber maker Zoltek (NAS: ZOLT) reported higher earnings despite its largest customer, Vestas, cutting orders 40%, it was apparent there was still a gentle breeze blowing at the backs of the wind power industry. That was borne out by the results of wind energy tower maker Broadwind Energy, which reported that sales wafted 41% higher in the third quarter, in part because of better tower sales and bolstered by a deal to supply Siemens (NYS: SI) with 36 towers for its MidAmerican Energy project.
Yet another aspect of Broadwind's business is gear making, and that got a boost when Caterpillar (NYS: CAT) contracted it to make welded sub-assemblies for its draglines, crawlers, and excavating equipment that will be used to expand the Bucyrus division.
CAPS member wwolf12 is looking for the Caterpillar agreement to blow Broadwind's stock higher, but tell me in the comments section below or on the Broadwind Energy CAPS page if you think this makes it a towering opportunity. Then put it on your watchlist to keep track of its progress.
Going into orbit
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 Fool contributor Rich Duprey holds no position in any company mentioned. Click here to see his holdings and a short bio. Motley Fool newsletter services have recommended buying shares of Vulcan Materials. 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.
Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.