Typically, it doesn’t take a lot for a stock to trade with gains of more than 5% in a session; it can be caused by an analyst’s remarks, sometimes it’s caused by earnings, or maybe it’s just a technical rally. Sometimes the moves are warranted and other times they are not. Therefore, I am looking at several moves higher to determine if the stocks are presenting value or are value traps.
After reporting that its Phase 3 trial for ThermoDox failed, Celsion Corporation (NASDAQ:CLSN) fell over 80%, but has rallied 20% during the last three sessions, including 10% on Monday. There was nothing to spark the movement, therefore it was a technical rally.
The stock now has a market cap of just $50 million, after being valued at $330 million last year. In my opinion, there is no reason to buy this stock. A biotechnology company’s stock is valued according to its lead candidate or pipeline, and the stage at which the company is in the clinical process. Celsion is now going back to the drawing board, and there are no guarantees that it will be able to weather this storm. Therefore, I wouldn’t chase the hope for quick and meaningless gains.
Are Institutional Investors a Sign of a Turnaround?
Shares of beaten-down stock Diamond Foods, Inc. (NASDAQ:DMND) rose 11.24% on Monday after the company disclosed in a 13G filing that BlackRock upped its stake to 7.85% last week. This is a stock currently priced at $16.03 that traded at $90 a couple years back.
The management has been shaky at best yet the company’s revenue remains somewhat stable and its stock continues to trade remarkably undervalued. This is a high-risk investment but with investors being so quick to buy fallen stocks, I think it’s very possible that Diamond becomes the next Research in Motion (NASDAQ:BBRY), First Solar, Inc. (NASDAQ:FSLR), etc.
Solar Stocks Rally
Rather than looking at just one stock let’s take a peek at an entire space that is trading higher: solar stocks. On Monday news that bankers are close to securitizing solar panel leases into bonds created gains for the entire industry. If this change occurs then solar bonds would package panel leases and be supported by electricity purchase commitments. This could lead to more consumers electing to use solar panels.
SunPower Corporation (NASDAQ:SPWR) led the space in gains, trading higher by almost 10%. Last week I said that SunPower’s fall after earnings was illogical, and I find it interesting that investors are rushing back to buy the stock so quickly. If these “solar bonds” do occur, then break down the space into which stocks are cheapest and which companies have the greatest exposure in the U.S., SunPower is a good start.