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(Best) STEC, VNDA, MOS (Worst) BAC, GET, MGA from Better Trades
May 18, 2009
After a two-month rally within the stock exchanges, investors resumed their concerns that the current economic programs will not propel the country back into prosperity as quickly as originally anticipated. During the week, financial stocks weighed heavily on the markets, as traders were worried that last week's rally was overdone. Over the course of the week, the Dow slipped 3.6%, the S&P was lower by nearly 5% and the NASDAQ was down 3.4%.
Top 3 Stocks
STEC – Simple Technology Inc. ($10.30 to $14.36) +39.4%
Leading the way for upstart stock gains, Simple Technology Inc. (STEC) posted substantial gains over last week’s trading sessions, largely due to the company’s solid earnings reports and guidance for the upcoming quarter above market expectations. As a technology solutions provider offering products based on dynamic random access memory, or DRAM, static random access memory, or SRAM, and Flash memory technologies, STEC booked a higher 1Q profit than the previous year as sales increased year-over-year.
For the most recent quarter, STEC recorded net income of $3M, or $0.06 per share, compared to the previous year’s tally of $1.8M, or $0.04 per share, an increase in profits of nearly 67%. Revenues, meanwhile, jumped as well, climbing from $50.7M to $63.5M, an advance of more than 25%. On average, analysts were looking for the memory chipmaker to record quarterly earnings of $0.11 per share on total sales of $59M.
Looking ahead into the upcoming 2Q, STEC issued guidance in that earnings should come in between $0.20 and $0.22 per share on total revenues ranging between $68M and $70M. In the meantime, analysts are looking for STEC to post 2Q earnings of $0.10 per share on overall sales totals of $58.91M.
Throughout the prior week, STEC’s stock increased nearly 40% in market share, adding more than $4 a share after the company’s solid 1Q earnings release. Over the course of a year, shares of STEC have ranged between $3.42 and $14.48 per share. at the start of the new trading week, Simple Technology stock advanced once again, adding $1.19, or 8.3%, to close at $15.55. During the trading session, STEC shares reached a new 52-week high of $15.07 before closing slightly lower.
VNDA – Vanda Pharmaceuticals Inc. ($8.45 to $11.19) +32.4%
Reporting equally impressive stock gains over the past week was Vanda Pharmaceuticals Inc. (VNDA), which is a leading biopharmaceutical company that is focused on the development and commercialization of clinical-stage product candidates for central nervous system disorders. The week’s surge in stock price was directly attributed to the company’s approval from the FDA on their schizophrenia drug Fanapt.
At the start of the trading week back on May 4, Vanda’s stock price was trading just over $1 per share. Upon news from the FDA, VNDA shares surged at one point more than 1000% during the week, reaching a high of just over $8 per share. Although the drug is not a breakthrough, or considered innovative, the company is looking to sell upwards of $500M of the drug, with $250M in sales being the lower end of that scale.
Even with Fanapt being rejected last summer on merits of not matching the effects of current schizophrenia drug already on the market, the FDA was asked to compare the effects of Fanapt to placebos and not to the company’s competitors. In this regard, the drug passed the test.
Analysts believe that the company should be in the market to sell, the company as a whole, or to go into partnership with a more established pharmaceutical firm such as Johnson & Johnson (JNJ), Pfizer (PFE) or AstraZeneca (AZN). In addition, if the company does manage to reach a deal with other companies, Vanda’s stock price could do even better than its current range, especially competing in a tough schizophrenia treatment market.
At the start of the pervious week, shares of VNDA were trading at $8.45 per share. By Friday of last week, shares had jumped to nearly $13 a share, before sliding to just over $11 per share, an increase of more than 32%. By the close of Monday’s session, May 18, shares of VNDA were still climbing, adding $1.10, or 9.8%, to end the day at $12.29 per share. During the year, shares have traded as low as $0.45 per share and as high as $12.96 per share, which was established on May 13.
MOS - Mosaic Co. ($45.45 to $51.30) +12.9%
Rounding out the list of stocks posting sizeable gains over the past week was Mosaic Co. (MOS), which is one of the world's leading producers and marketers of concentrated phosphates, potash, nitrogen fertilizers and feed ingredients for the global agriculture industry. Although not as extensive in their gains as STEC and Vanda Pharm, Mosaic still managed to increase their market share by nearly 13% over the week when the overall markets traded in the red.
With no specific company news released throughout the week, the performance of the stock was generated solely on analysts' comments regarding the fertilizer industry. Earlier in the pervious week, an announcement from the USDA revealed their projections for the 2009/10 corn harvests stating that corn yield could come in at their second highest level in history during that time, thus pushing the industry’s stocks higher. As a whole, the Agricultural Chemical and Fertilizer Stocks Index is higher by 0.8%, yet it currently lags the S&P 500 by 1.9% over the past month.
"Corn is by far the most fertilizer intensive of the major row crops, and rising planted acreage translates directly into stronger demand for each of the primary fertilizer nutrients," confirmed a J.P. Morgan analyst. Meanwhile, a Morgan Stanley analyst commented that, "We believe that current retail potash prices are $39 per acre for corn application. Assuming that prices decline by 50% between now and next fall or spring, farmers could save $20 per acre by deferring application. However, at $4 corn, should farmers' yield decline by 5 bushels, there would be no net savings."
Continuing with their weekly surge in price, shares of Mosaic added to last week’s 13% gain in market share. At the conclusion of Monday’s trading session, May 18, Mosaic added $3.70, or 7.2%, to close the day at $55.00 per share. After adding nearly $6 a share over the past week, the stock currently sits near the lower end of its 52-week range of $21.94 and $163.25 per share.
Worst 3 Stocks
BAC – Bank of America Corp. ($14.17 to $10.67) -24.7%
On the down side of the spectrum, Bank of America Corp. (BAC) followed the lead of the overall markets this past week, shedding nearly a quarter of its market value. As one of the world's leading financial services companies, Bank of America provides individuals, small businesses and commercial, corporate and institutional clients' new and better ways to manage their financial lives.
The downfall of the company's stock price over the week was attributed to the government’s release of their “stress test” results, which pressured the financial firm to revamp their board of directors as well as setting up a program in order to increase their cash on hand. Bank of America topped the list of 19 banks that are in desperate need of capital and is expected to raise upwards of $34B upon the Fed's request.
Following the stress test, BAC quickly sold 6% of their stake in China Construction Bank to Asian investors for more than $7B, leaving only an 11% stake in the company. Additionally, BAC has also mentioned the selling of their Columbia asset management division, as well as their First Republic Bank unit that could amount to more than $10B for the combined sales. Bank of America's First Republic Bank was inherited when the company acquired Merrill Lynch & Co.
At the conclusion of the previous week’s trading, shares of BAC slipped nearly $4 a share after the government’s comments regarding the bank’s present and future position within the financial industry. The start of the new trading week reversed the direction previously seen last week, as shares of BAC jumped nearly 10% in Monday’s trading session, adding $1.06 to close at $11.73 per share. BAC shares have ranged between $2.53 and $39.50 per share over the past year.
GET – Gaylord Entertainment Co. ($16.94 to $13.22) -21.9%
Operating as a diversified entertainment company primarily in three segments, hospitality and attractions, creative content, and interactive media, Gaylord Entertainment Co. (GET) witnessed their stock’s price recede more than 20% over the course of a week, due largely to developing news about an investigation into the company.
Law offices based out of Pennsylvania confirmed that the firm is following up on potential claims against Gaylord’s current executives in regards to the company's recent operation and management practices. In a press release by Gaylord's largest shareholder TRT Holdings Inc., the holding company cited verbiage that the company's executives had "failed to adequately deliver," and "failed to operate the business with discipline" as well as the "lack of accountability to shareholders."
As a reaction to the recent disconcert with Gaylord’s management practices, Moody's Investors Service recently downgraded the company’s family and default rating from “B2” to “B3,” one notch lower than Moody’s junk rating. "The ratings downgrade reflects Moody's view that despite the ramp-up of the Gaylord National, weaker than expected operating performance will result in weaker than anticipated debt protection measures for a period longer than first believed and which are more representative of the revised ratings," a Moody's analyst confirmed in a statement.
Adding to the troubled stock was Gaylord's recent guidance for the year, in which the company predicted a decline in sales of between 13% and 19%, much more than the previous decrease in sales of 9% to 12% that the company originally anticipated.
To close out the week, shares of GET were down nearly 22%, falling more than $3.50 per share. To start the current week, shares of Gaylord Entertainment surged more than 8% by the close of Monday’s trading session, adding $1.13 to finish at $14.35 per share. Over the past 52 weeks, shares of GET have ranged between $4.76 and $36.27 per share.
MGA – Magna International Inc. ($38.81 to $30.88) -20.4%
The remaining company on the list of those posting significant declines in their stock’s price is Magna International Inc. (MGA), which is an independent supplier of original equipment components, assemblies, modules and systems and related tooling for cars and light trucks, primarily for North American and European original equipment manufacturers.
The prior week’s related news to Magna was focused on the company's previous statement that they may be interested in acquiring a minority stake in General Motors’ European subsidiary Opel AG. Opel, which is based in Germany, employs more than 26,000 workers, represents more than half GM’s European workforce. Magna founder, Frank Stronach, mentioned during the previous week that the company was interested in investing in a 20% stake in Opel as a part of a consortium with two Russian companies, automaker GAZ and the government controlled Sberbank.
With Magna’s Russian partners, the group of investors would provide Opel with market entry into the Russian markets, where potential vehicle sales could double within a few short years. Although these associated companies all face similar economic pressures, GM and Opel will have to take much into consideration for Magna to gain access to the company.
On a side note, Magna is currently slated to receive just over $63M from Chrysler LLC in the coming weeks, as payment for outstanding balances before the automaker filed for bankruptcy. Most suppliers, including Magna, are expected to receive only 40% to 50% of what was originally owed to them by Chrysler and will be paid in installments over the next several weeks.
Over the course of a week, shares of MGA traded lower by more than 20% giving up nearly $8 a share. Coming off its yearly low of $19.63 set back on March 9 of this year, Magna’s stock put together a solid run, nearly doubling its stock price. However, after peaking at nearly $40 a share, the stock reversed course and trended lower. Nevertheless, with the start of the new trading week, shares of MGA rebounded from last week’s decline, adding $1.16, or 3.8%, to close out Monday’s session at $32.04 per share.
2009 Better Trades Article
brought to you by
BRIAN MULLIN
