Taking a page from my standing "Hottest
ETFs of the Week" segments, I wanted to highlight some small cap stocks that have moved in excess of 100% during the prior month. While I make no predictions as to whether they will continue to rally similarly in the coming months, it is likely that given such rapid moves, there will likely be high volatility in shares which may lend itself to various investment plays ranging from exploiting the
earnings options volatility play to just taking a long or short position based on your assessment of fundamentals vs. valuation.
VNDA - Vanda Pharmaceutical - Up 1008% - Vanda ran up by over 800% 2 weeks back when they were granted surprise approval for their schizophrenia drug
Fanapt. Given the anticipated likelihood of blockbuster status vs. the relatively paltry market
capitalization of shares, they
rallied in unprecedented fashion...then continued to follow through last week an additional 32%. The question is whether shares will continue to rally or come back to earth. The reason many investors believe shares will continue to rally is that given their small size, Vanda will likely have trouble
commercializing the drug on its own, which may entail either a lucrative partnership or an outright takeover by a large
pharma (who have been on shopping sprees given their anemic pipelines). Such a deal would likely bring an additional premium to shares, regardless of where they traded before the deal. So, for a quick bump of another say, 20-100%, investors are continuing to pile on for the ride.
COT - Cott Corporation - Up 213% - Cott has been on a roll due to a
perceived turnaround following earnings that blew away street expectations.
Cott is a multinational soft drink franchise that makes still and sparkling flavored waters, juice-based products, bottled water, energy drinks among other things. Shares had been well below $1 per share in the early part of 2009, but they have since rallied to $4.70 recently. Given that it appears as though
Cott has emerged from the brink of bankruptcy, a return to prior levels would bring triple digit returns from here as well.
DTG - Dollar Thrift - Up 164% - Dollar
Thrifty has been thriving under the premise that with summer around the corner, the car rental business will pick up again. With investors losing close to 50% of their retirement stash and people just feeling more "poor" than they did a year ago even if their income hasn't diminished, the thinking is that domestic vacations employing the use of US fleets are going to supplant more lavish overseas vacations that the US rental agencies don't get a slice of. This trend has been in place for a few months now, with
DTG up over 300% year to date. The question is, "Are investors jumping in now too late to the party?".
LNET - Lodgenet - Up 183% - Lodgenet is an interesting outfit that
provids interactive media and connectivity solutions to the hospitality industry in the United States, Canada, and Mexico. There isn't a lot of coverage or press on the outfit, but in reading through the latest
Earnings Call Transcript, they appear to be
benefiting from growth in their new businesses like
HD services even though their overall revenue took a hit in the last quarter. Their
healthcare portfolio grew over 200% as well, which brings lucrative margins. Up 585%
YTD, this outfit may be worth looking into further as a long term trend on their services vs. the competition.
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