It's an age-old question: Do you chase fast-rising stocks or go
after beaten-down names? If you're in the former camp, check out
the stocks in the table below. They've posted stunning gains in
July and investors may wonder whether yet more gains lie ahead.
As is with any list of recent hot stocks, you'll always find a few
names that have just been acquired. Both
ADC Telecom (Nasdaq: ADCT)
ATC Technology (Nasdaq: ATAC)
have been snapped up recently and are likely close to fully-valued
unless rival bidders emerge. Let's take a closer look at a few of
the other names on this list.
One Month Gain
52- Week High
52- Week Low
|Momenta Pharma (Nasdaq:
|IDT Corp (
|*Source: Frank Russell
Arena Pharmaceuticals (Nasdaq: ARNA)
It you were lucky enough to hitch a ride with Arena
Pharmaceuticals, then it must be awfully tempting to take profits.
Don't do it. Even after more than doubling since mid-June, there
may be more good news to come. As
in a discussion regarding Arena and its rivals, the company's
anti-obesity drug has investors salivating. That's because the
company could conceivably bag more than $1 billion in royalty
revenue from marketing partner Eisai International -- in a best
case scenario. Even after its recent run, the company is still
valued at just $600 million.
The good news may keep coming. Arena will hold a conference call
with investors next Tuesday, August 3rd. As management walks
through the Eisai contract in greater detail, investors may push
shares yet higher. And though it's a remote possibility, management
may also announce an international marketing partner (Eisai has
rights for U.S. sales only).
The real catalyst for shares will come in September, when the FDA's
advisory panel sits down to review Arena's lorcaserin drug. In
light of the drug's relatively benign safety profile, the FDA is
expected to offer up praise. But investors should note that
lorcaserin seems to be only mildly effective, and the FDA sometimes
rejects new drugs that don't yield very strong benefits. As with
many of the biotech stocks in the table above, these shares come
with high risk -- and high reward, especially after their recent
Power One (Nasdaq: PWER)
After years of heavily investing in Research & Development
(R&D), management at Power One can finally breathe a sigh of
relief. First quarter sales for this power control device maker
were far ahead of even the most bullish forecasts, and shares have
been on a tear ever since.
Not only were first quarter sales strong, but
soared from $200 million to $400 million in just one quarter. Power
One is seeing robust demand in the clean energy space because its
power inverters can precisely regulate electrical current flow from
erratic wind flows. That surging backlog tells that sales momentum
is likely to be maintained. Power One reports results tomorrow --
Trouble is, Power One has more recently traded yet higher on the
bullish words of tele-pundit Jim Cramer. And when he gets behind a
stock, it tends to move higher -- but fall lower again once he
stops talking about the stock. As a result, shares may be getting
ahead of themselves in the near-term. And after blowing past
estimates for each of the last three quarters, investors are likely
expecting another blowout this time around. If results merely track
forecasts, momentum investors may quickly exit the stock.
Action to Take -->
Check out how Arena Pharma trades on Thursday after reports are
released. Any major pullback as July winds down would set the stage
for another upward move in August.
Shares look poised for further gains ahead of next week's
conference call, but be prepared to lock in gains if management's
commentary provides the stock with another sharp boost. An
increasing number of investors may be looking to book profits with
shares up so sharply in such a short time.
-- David Sterman
David Sterman has worked as an investment analyst for nearly two
decades. He started his career in equity research at Smith Barney,
culminating in a position as Senior Analyst covering European
banks. David has also served as Director of Research at Individual
Investor and has made numerous media appearances over the years,
primarily on CNBC and Bloomberg TV. David has a master's degree in
management from Georgia Tech. Read More...
Disclosure: Neither David Sterman nor StreetAuthority, LLC hold
positions in any securities mentioned in this article.