After a round of several consecutive 100-point gains last week the Dow Jones Industrial Average has put together an equally strong run in the other direction, most recently on Friday, where it fell 120 points, leaving the index just about where it started.
Although almost every single component of the Dow fell, American Express and McDonald's managed to eke out slim gains, rising less than a 0.5% each as both reach out to penny-pinching consumers who will have to make their coins scream even more after we go over the fiscal cliff.
Still, the three stocks I'll talk about today managed to far outpace the Dow or its components, some even surging higher by double-digit percentages. Resist the urge to high-five everyone in the cubicles next to you, however. Smart investors won't celebrate until they know why their stock surged, because without a fundamental basis for the bounce, these stocks could just as quickly make the return trip down.
Advanced Micro Devices
On a roll
Despite some lingering concerns over Halozyme Therapeutics' Enhanze, biotechs and pharmaceuticals still think enough of the enzyme it discovered to believe it can transform the way drugs are delivered. Halozyme soared after Pfizer became the latest drug giant to jointly develop a series of injectibles using the platform.
Enhanze modifies medicine through the use of human enzymes so they don't have to be given intravenously but rather may be delivered through an injection. There's been a lot of interest in what Halozyme offers, but the biotech has had to deal with several setbacks as the FDA worries about the safety profile of the enzymes. The regulatory agency has rejected drugs developed by ViroPharma and Baxter International , though the former has been given the green light again to resume clinical studies while Halozyme has to offer up more tests for the latter.
The deal with Pfizer is significant, because it shows interest isn't waning after the decisions, and with money paid to the biotech upfront, it gives it the financial wherewithal to keep moving forward. Halozyme is also developing an injectable version of cancer therapy Herceptin in partnership with Swiss pharmaceutical giant Roche, which has a nearly $6 billion market.
Getting a charge out of batteries
Housing stocks continue to perform as if we're back in the go-go days of McMansions on every corner, though as the Fool's Matt Koppenheffer points out, they may indeed be on their way back. Pulte Homes says buyers want and need new, bigger houses.
As a result homebuilder stocks have made incredible gains in 2012, as Pulte shares have nearly tripled in value, KB Homes is up 130%, and even Beazer Homers is up more than 30%. But the real winner has been Hovnanian Enterprises, which enjoyed a quadrupling of its stock this year.
The industry's resurgence probably has more to do with the Federal Reserve's moves to keep interest rates at artificially low levels, which continues to delay the cleansing that's needed in the industry to wipe out the shadow inventory that hovers in the background. It sends the wrong signals to the market, so that builders start building more again and shows they learned nothing from their collapse because of it. Hovnanian's rise on Friday may have more to do with options expiration than the industry's fundamentals, but I continue to expect the builder to fall like a house of cards once again.
A chip in the armor
Where PC sales have long gone over the cliff and analysts don't expect them to hit bottom anytime soon, chipmaker Advanced Micro Devices may have finally reached such depths that it can actually be considered a bargain now. At its lowest point it lost more than three quarters of its value, but it has since climbed 43% from its nadir (though its still almost 70% off its highs). In comparison, Intel is down just 27% from its peak.
While new ultrabooks (or, AMD's answer to them, the Asus VivoBook) and Microsoft's new Windows 8 operating system were supposed to provide a spark for the industry, that hasn't materialized -- yet. That could still come around, though, in 2013 and with AMD at severely depressed prices even after its rally, it could be a stock to watch.
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The article Whoa! A Year-End Rally for These 3 Stocks originally appeared on Fool.com.
Rich Duprey owns shares of Intel and Pfizer. The Motley Fool owns shares of Intel, McDonald's, and Microsoft. Motley Fool newsletter services recommend American Express Company, Intel, McDonald's, and Microsoft. 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. The Motley Fool has a disclosure policy.
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