BetterTrades
(Best) SVNT, STEC, PWRD (Worst) AGO, HAR, POT from Better Trades
June 22, 2009
The markets retreated throughout the previous week, as sellers reentered the marketplace having appeared to run out of reasons to keep the rally going. Analysts believe that stocks are losing pace in the markets due to investors contemplating what it will take to resume the markets’ trek higher.
After a three-month rally, investors remain wary of a bull run, as pessimism has resurfaced due to overly optimistic expectations for an economic recovery. Despite better-than-anticipated economic reports during the week, the Dow Jones, which lost about 215 points on Monday, posted its biggest drop since May 13.
Top 3 Stocks
SVNT – Savient Pharmaceuticals Inc. ($9.26 to $12.06) +30.2%
One of the biggest percentage movers over the past week came from Savient Pharmaceuticals Inc. (SVNT), which conducts business as a specialty pharmaceutical company with expertise in developing, manufacturing, and marketing human health care products for niche markets. Following the previous trading sessions, shares of SVNT jumped nearly $3 per share, due largely to the company’s gout drug that is in the process of receiving approval from the FDA.
The drug, Krystexxa, was approved by an outside government panel by a 14-1 vote last week and it was recommended to the FDA that the drug should be approved on merits of being a safe and effective method to help patient combat gout.
The condition, refractory chronic gout or treatment failure gout, is gout that is derived from patients that have trouble stabilizing serum uric acid when conventional urate-lowering drugs and therapy have appeared not effective. “We continue to believe approval is highly likely in the near term, but some work remains to be completed by the FDA," announced Leerink Swann analyst Joseph P. Schwartz.
Upon news of the pending approval, shares of SVNT jumped more than 31% during trading last Wednesday. By the close of the week, the company’s stock was up a collective 30.2%.
In the start of the new trading week, Savient shares continued their upward trend, gaining 2.8%, or $0.34, to end Monday’s trading session at $12.40 per share. Over the course of a year, SVNT shares have traded within a range between $2.80 and $28.42 per share.
STEC – STEC Inc. ($18.73 to $24.20) +29.2%
Included in the list of companies posting solid gains over the past week was STEC Inc. (STEC), which is a technology solutions provider offering products based on dynamic random access memory, or DRAM, static random access memory, or SRAM, and Flash memory technologies. By the end of last week’s trading, STEC’s stock was up nearly $6 a share after the company increased their upcoming 2Q forecast.
Based on the company’s increase in revenues from their solid state drive ZeusIOPS, STEC adjusted their quarterly earnings projections from $0.20 to $0.22 per share, up to a range between $0.32 and $0.36 per share. Figures were calculated on the fact the ZeusIOPS is expected to post sales exceeding $55M during the quarter. ZeusIOPS is designed to create a storage performance revolution for enterprise applications.
In addition to STEC increasing their EPS, the company also raised their expectations for revenues. The company previously stated a range between $68M and $70M in quarterly sales and is now looking to post revenues between $82M and $84M. Analysts, in the meantime, are looking for the chipmaker to post earnings of $0.21 per share on total sales of $69.05M.
Following last Tuesday’s forecast adjustment, shares of STEC surged 30%, along with establishing a new 52-week high at $24.62 per share. At the start of the new trading week, STEC’s stock reversed course to conclude Monday’s session down nearly 7%, falling $1.58 to end the day at $22.62 per share. Although the stock reached a new 52-week high, the stock has also traded as low as $3.42 per share.
PWRD – Perfect World Co. Ltd. ($25.27 to $29.18) +15.5%
Rounding out the list of top percentage gaining companies during last week’s trading was Perfect World Co. Ltd. (PWRD), which is a leading online game developer and operator in China. The company’s weekly growth in market value was directly related to an analyst with Roth Capital Partners increasing his estimates on Perfect World, stating steady growth within the Chinese online gaming industry would bolster the company’s revenue outlook towards the higher end of expectations.
In conjunction with the analyst’s praise, Perfect World increased their outlook for the upcoming 2Q stating that a newly released game and other recently released games have sold much more rapidly than anticipated.
As for their projections, PWRD is now looking to post quarterly sales between 489 million yuan, or $71.7M, to 510 million yuan, or $74.7M. The new range would indicate an increase in revenues of 15% to 20% over the company’s 1Q results. The company had previously stated a sales range between 417 million yuan to 434 million yuan. Analysts were anticipating quarterly sales of $64M.
Regarding the analyst that lifted his expectations on PWRD, Adam Krejcik stated, "In our opinion, Perfect World is only beginning to benefit from its diversification strategy and we see significant future earnings power."
Krejcik is now predicting revenue estimates of $74.5M, up from his previously stated figure of $63.5M. Krejcik also increased his earnings per share from $0.51 to $0.65 per share. Lastly, the analyst also increased his fiscal year 2009 revenue forecast to $293.4M from $264.6M, as well as his 2010 estimate to $358.8M from $321.7M.
At the conclusion of the June 22 trading session, shares of PWRD had reversed their upward direction to end the day down nearly 2%, or $0.56, at $28.62 per share. During the past year, shares of Perfect World have traded as low as $8.78 per share, and as high as $30.00 per share.
Worst 3 Stocks
AGO – Assured Guaranty Ltd. ($14.89 to $11.50) -22.8%
On the other side of the trading coin, Assured Guaranty Ltd. (AGO), a Bermuda-based holding company providing credit enhancement products to the municipal finance, structured finance and mortgage markets, posted some of the largest percentage losses over the course of a week. By the end of the June 19 trading session, AGO shares had slipped nearly 23%, losing more than $3 per share.
Throughout the week, the company announced that they were in the process of issuing stock for sale in which the proceeds would be used to finance the acquisition of Financial Security Assurance Holdings Ltd (FSE). FSE, which is owned by the Belgian-French financial group Dexia, is expected to be sold to Assured Guaranty for $361M in cash and 44.6M in AGO shares, totaling $722M.
As a result of the public offering of stocks and notes, AGO is looking to raise nearly $574M, of which the cash portion of the deal would be covered. The offering, will include upwards of $400M in common stock and an additional $150M in equity notes due in 2014. Offerings are expected to be completed by June 24.
Heading into a new trading week, AGO shares continued their downward trek on Monday, losing 5%, or $0.57, to end the day at $10.93 per share. trading near the lower end of their yearly range, Assured Guaranty shares have traded as low as $2.69 per share and as high as $22.40 per share.
HAR – Harman International Industries Inc. ($23.04 to $18.31) -20.5%
Losing nearly $5 a share over the course of a week, Harman International Industries Inc. (HAR) is a leading manufacturer of high-quality, high-fidelity audio products and electronic systems for the automotive, consumer and professional markets. The company’s downfall throughout the previous week was in direct correlation to Harman announcing a public stock offering targeted to close on June 23.
Harman, which is expected to offer 10.7M shares at $18.75 per share, is expected to gain nearly $200M in proceeds in order for the company to pay down debt under their revolving credit agreement, enhance liquidity and use possibly towards acquisitions.
Operating within the devastated automotive industry, Harman has also made it known that the company plans to reduce their overall workforce by more than 2,000 jobs, nearly 20% of their staff. The plan calls for the cuts to be finalized by the end of their fiscal year, which ends on June 30.
In additional efforts to curtail losses and lack of demand for their products, Harman has also halted hiring, cut travel expenses by more than 30%, suspended specific retirement plan matching offers and shortened work weeks at select factories.
Upon the announcement of a public offering on June 15, shares of HAR proceeded to fall more than 8% in after-hours trading. The remainder of the week proved challenging for the company, as the stock ended the week just over $18 per share.
At the start of the new week, the downward spiral in trading continued for Harman, which witnessed their stock slip 4.3% in Monday’s session, giving up $0.79 to end the day at $17.52 per share. Throughout the previous year, shares of Harman have ranged between $9.17 and $46.35 per share.
POT – Potash Corporation of Saskatchewan Inc. ($116.01 to $92.72) -20.1%
Rounding out the list of top losers, percentage wise, over the past week was Potash Corporation of Saskatchewan Inc. (POT). Potash is the world's largest potash company, the third largest phosphate producer and the second largest nitrogen producer in the world. Trading last week proved difficult for Potash, as the stock surrendered more than 20% of its market value during the week, in large part due to a cut in overall production.
Earlier in the week, the company stated that they would reduce their 2009 potash production by 0.8M tons, bringing yearly expectations for production to 5.5M tons. The key culprits to the production cuts were in correlation to an extremely slow spring planting season, as well as soured negotiation with offshore buyers.
In dealing with international customers, Potash is confident that the company’s backend of 2009 will prove to be more profitable for the company. The company is awaiting negotiations to complete with India and China, as inventories appear to be running slim on wholesale potash supplies. These countries should come to an agreement with Potash in the near future.
However, for the full year 2009, Potash could end up producing, on average, 50% lower volume than the previous year, which would weigh heavily on the near-term outlook for the company’s stock performance.
By the sound of the closing bell on June 22, shares of POT were down nearly 6%, losing $5.45, to end the session at $87.27 per share. During the previous week’s trading, Potash witnessed their stock’s price drop more than $23, leaving the price at $92.72 per share heading into the new week. Over the course of a year, Potash’s stock has traded as high as $237.08 per share and as low as $47.54 per share.
2009 Better Trades Article
brought to you by
BRIAN MULLIN
