Whoa! These 3 Stocks Rode the Dow Higher
Reflecting President Obama's sentiment that we can't "cut our way to prosperity," Congress cut a fiscal cliff deal that pretty much just raises taxes. That was enough, though, to send the Dow Jones Industrial Average racing, soaring 308 points, or 2.4%.
Once again every Dow component was in the green with some of the best performers being tech and industrials stocks, like Caterpillar , which jumped 4.3%, and Alcoa , up 3.6%.
But resist the urge to high-five everyone in the cubicles next to you. 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.
North American Palladium
I've been bearish on car-sharing leader Zipcar for some time, believing the rising competition from rental agenciesHertz and Avis would eat it alive. I just didn't think they would eat it whole, at least not so soon. Yesterday Zipcar benefited from the $500 million acquisition bid from Avis, which is trying to expand its own car-sharing business.
While Zipcar investors have to be thankful for the 49% premium the purchase price represents, it doesn't really make you whole if you were holding on from its IPO in April of 2011, which opened at $30 a share. The stock lost 63% of its value last year and the $12.25 per share offer is still 60% below the IPO price. There may be new, higher offers for the car-sharing specialist, but nothing's going to close the gap.
I've long believed Zipcar was a no-moat business; with lower cost options like car2go coming on the seen, the biggest threat it faced was having to cut the fees it charged which accounted for the bulk of its revenues. The acquisition by Avis puts Zipcar where it belongs, as part of a larger, better-financed operation.
Proving its mettle
A combination of expectations for better economic growth and the largest supply deficit in over a decade sent palladium futures soaring along with the exchange-traded funds that track them. Analysts are looking for better than 4% growth in auto sales this year. Combine that with lower unemployment and a continuation of policies pushing record-low interest rates, and palladium, which is used in automobile catalytic converter systems, should benefit from higher demand. North American Palladium -- one of only two primary palladium miners along with Stillwater Mining -- was sent soaring on the expectations.
In fact, most industrial metals roared to life yesterday, with molybdenum specialist Molycorp jumping 9%, copper miner Taseko Mines up 7%, and even troubled coal miner James River Coal rose 6%.
Palladium has been hurt by weak pricing in recent periods because Russia has sold off its inventory, but that glut is coming to an end now and leading to an era of scarcity. With China propping up a number of industries with subsidies and the U.S. car market at least looking healthier, the chance for NAP and Stillwater to build on the gains remains high. Europe is another matter and continues to be touch-and-go economically, but I bet we will see North American Palladium achieve new highs sooner rather than later.
Say no more
Caught up in the euphoria yesterday were shares of biotech company Dendreon, which benefited from two positive articles appearing at the same time, one here at The Motley Fool and one at Seeking Alpha. The tag-team duo suggested that the restructuring the biotech went through -- selling off facilities to Novartis , laying off employees, and reducing expenses -- will redound to its bottom line. Equally important will be the potential for doubling sales almost overnight if it can gain European approval for Provenge, its prostate cancer therapy.
Dendreon's stock remains depressed even after yesterday's gain, down by two-thirds from its 52-week high. Although a doubling of its stock wouldn't completely close the gap, just like with Zipcar it takes some of the sting off a bad situation, and there's a chance the markets could bid shares even higher.
There are a lot of caveats involved for any of that to happen, and yesterday's articles were little more than speculation, so investors can expect the biotech to be volatile into the foreseeable future.
Dendreon's run over the past four years witnessed sub-$5 share prices skyrocket to 10-bagger status before tumbling all the way back down below $5, as its revolutionary prostate cancer vaccine Provenge became a lightning rod of debate. But where does that leave investors -- other than a bit nauseous from the roller-coaster ride? Our own David Williamson answers this question, and many more, inside our brand-new premium research report on Dendreon. Inside, he details every key issue facing the company and outlines just how Dendreon intends to regain its former glory. The report also comes with a full year of analyst updates, so claim your copy of this exclusive report today by clicking here now.
The article Whoa! These 3 Stocks Rode the Dow Higher originally appeared on Fool.com.Rich Duprey has no positions in the stocks mentioned above. The Motley Fool owns shares of Dendreon, Hertz Global Holdings, and Zipcar. Motley Fool newsletter services recommend Zipcar. 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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