At the conclusion of each week, VFC's Stock House examines some news items, stocks and stories that made headlines during the previous trading week, but may also make headlines or influence trends during the upcoming week as well.
Ordinarily the only significant trading investors see during the closing couple of weeks of December is some tax-loss selling, but given that we're now in serious "crunch time" in terms of possibly averting a fiscal cliff calamity, the coming week or two could be full of volatile moves based on the headlines and updates of the day. The markets edged lower on Thursday and Friday of last week, indicating that investors may be losing faith that a deal can get done - even one that would postpone a final decision and temporarily halt the tax cuts and spending hikes that would be implemented come 1 January.
Another factor that could come into play for the remainder of the year is capital gains selling. Because capital gains taxes could be slated for a significant bump, investors may take advantage of bailing out under the 2012 rate, rather than take an additional tax hit next year. Many analysts, especially those that favor higher taxes, argue that investors would not sell for that reason alone, but others speculate that capital gains considerations are a large part of why Apple (AAPL) shares have been on the rapid decline over the past couple of weeks. Looking at it objectively, however, Apple is also facing much stiffer competition in the smartphone market that is about to also introduce Research In Motion's (RIMM) BlackBerry 10.
So, it's all eyes on Washington, with little distractions. Investors will be observing negotiations with probably a little more intensity that what the New York Giants showed in Atlanta this week, especially since President Barack Obama and House Speaker John Boehner still look to be far apart on finding some middle ground. Boehner noted over the weekend that he would settle for tax increases on those making more than a million dollars annually, but fell short of indicating that he'd go any lower. The White House is still standing fast.
In keeping with the theme over the past few weeks, 'tis the season to keep at least some spare cash on the sidelines in order to pounce on any broad market dip - or at least to take advantage of those individual stocks that may experience more protracted dives than others.
As negotiations continue to play out, here are a few stocks and stories to keep an eye on this week ...
General Electric Announces Boost in Dividend and Revised Share Buyback Plan
Although shares of General Electric (GE) closed the day unchanged on Friday, the company was full of good news for investors leading into the new year. Come January of next year, according to a Friday announcement, the dividend rate for GE shares will jump by twelve percent to nineteen cents per share, while the company also announced plans to boost its share buyback program by ten billion dollars. Both moves, according to Chief Executive Jeff Immelt, are intended to return cash to shareholders. The two moves also help to negate the dividend cut and issuance of new shares that took place in the wake of the financial meltdown of 2008-09, which resulted in GE shares trading for under ten bucks at the time. A revival in GE Capital has helped to spark the cash flow that will allow the company to implement these plans, although GE also looks to reduce exposure to its financial services division, given the huge hit it took during the crash of a few years back. The share buy back will extend into the year 2015. Already THE global conglomerate that touches many different sectors of the economy, GE may have again offered investors a reason to stick a few more shares of the company in the long term or retirement portfolio.
In moving into the next generation of industry and clean energy, GE also announced a deal with Ford Motor Company (F) a few weeks back where 2,000 of Ford's C-MAX Energi plug-in hybrids will be purchased for GE's business fleet. The company also maintains a collaborative effort with Capstone Turbine (CPST), a company gaining increased attention for its low-emission, clean energy producing microturbine units.
Barring any major market meltdowns again, GE may be positioned as a nice, stress-free addition to the long term portfolio. The boost in dividend rate certainly helps make that case.
Apple Continues its Decline
Apple shares continued their rapid decline on Friday, dropping by nearly another four percent and hitting intra-day lows of just over five hundred bucks per share. As mentioned above, many may have decided to sell based on expectations of higher capital gains taxes next year, but there is also concern of growing competition in the smartphone market. Apple has also not 'wowed' consumers with a new product lately, preferring simply to re-size or re-brand existing technology and offer updated models as often as most people change their undergarments in hopes of keeping consumers re-paying for pretty much the same product. The iPad-mini, for example, essentially competes with Apple's other product offerings and the initial reception of the iPhone 5 may be an indication that consumers are finally catching on - and not falling prey to - the "gotta have the latest model" hype. It also may be no coincidence that RIMM shares have doubled while AAPL has fallen, given the pending release of the BlackBerry 10. Just as quickly as BlackBerry became a thing of yesterday in America, so, too, can the iPhone as new and revived brands hit the market with just as much fanfare.
With all that said, however, APPL is far from finished and the time to buy may be when others are selling in this situation. The new Apple TV that is in the works could be the new "wow" product that consumers are looking for and sales of the iPhone 5 in China looked strong, according to weekend reports. Additionally, if investors are truly selling for capital gains purposes, then positions could consolidate leading into next year and rebound to somewhere between Citigroup's two estimates, should revenue continue to flow in at recent rates. It's also worth noting that shares had slipped to near the five hundred dollar mark just recently, only to rebound closer to six within the blink of an eye.
This is a story to watch for the week and into 2013. Some may see cracks forming in the foundations of this tech giant, but there's not yet a reason to predict Apple's market dominance is coming to an end.
Healthcare, Biotech, Pharmaceutical:
TrovaGene Pushes Through Six
TrovaGene Inc. (TROV) shares continued to surge on Friday and pushed through the six dollar mark after having gained momentum during the trading days prior. Volume also spiked and came in at more than five times the daily norm. The company had been gaining increased attention this year due to its diagnostic technology that could potentially identify markers for specific cancer types through simple urine tests, and with some of those tests nearing the commercial stage, Aegis Capital initiated coverage of the company with a rating of "Buy" and sparked the late-week rally. With a one-day spike of ten percent on Friday, TROV also made the Nasdaq 'largest percentage increases' list, likely attracting even more interest to the company. Investors will be looking this week to see if TROV is ready to hold its gains. Multiple of the company's diagnostics are slated for commercialization in 2013, the first of which - a diagnostic able to detect KRAS mutations through urine samples - is expected achieve that milestone this coming January.
With price and volume rising at such an impressive rate, investors could expect some day, swing and momentum traders to play a part in any pending volatility, but those looking to take advantage of this technology's potential could look to play any dips moving forward. TrovaGene's technology is advancing to the latter stages at a time when global health care trends are searching for cheaper and less-invasive ways to replace standing procedures and that makes TROV a stock to watch during the closing days of 2012 and into the new year of 2013.
Should the technology gain quick acceptance on the open market, it's likely that partnership and/or buyout talk could creep up and boost the collaborative efforts already realized by the company.
Another Patent For Amarin
Amarin Corporation (AMRN): As usual, it's tough to discuss this sector without throwing in an update regarding Amarin. Although shares modestly rebounded at points last week, they closed the day at below the nine dollar mark again as investors continued to await news on Vascepa's New Chemical Entity (NCE) status. A mid-day price spike on Friday indicated that investors are watching the wires for any relevant update and are prepared to act quickly and accordingly, but the NCE news has yet to materialize. Amarin did announce last week, however, the issuance of yet another patent from the United States Patent and Trademark Office (USPTO) based on the MARINE clinical trial results. It has been previously argued by the company that enough patent protection was being built, with or without NCE, to ward off any potential legal challenges, although it has also been indicated that NCE is a relevant issue in regards to a potential buyout or partnership. While anything can happen at any given time in this game, it's a relative given that few - if any - expect anything but the go-it-alone (GIA) strategy to reach fruition next quarter, especially without NCE.
Over the mid to long term AMRN could rebound as many still believe that Vascepa is an eventual billion dollar drug, but over the short term shares could remain depressed if GIA remains the preferable course of action for the pending launch. Since it's a trader's market where less and less are playing the 'buy and hold' game, that fact could weigh heavily on investor patience.
Vanda Denied In Europe
Vanda Pharmaceuticals (VNDA): Vanda launched Fanapt in the United States for the treatment of schizophrenia with the help of partner Novartis (NVS) a few years back, but the U.S. launch failed to meet expectations and shares have since declined to under five bucks. VNDA took another hit last week when the company announced that the product (known as Fanaptum in the EU) had received a negative opinion from the European Medicines Agency's (EMA) Committee for Medicinal Product for Human Use (CHMP) recommending against approval of Fanaptum. Shares dropped by roughly three percent on the news, but had been declining since the summer months anyway. Given the disappointing U.S. roll-out, investors were looking towards a European approval as a potential catalyst to inject some renewed life into this stock, but that potential looks to be on hold, at least for the time being. Vanda plans to appeal the EMA decision.
A portion of Vanda's revenue goes to Titan Pharmaceuticals (TTNP.OB) due to a long-standing licensing agreement, but Titan has used its share of the Fanapt revenues as leverage in obtaining financing from Deerfield Management. Titan shares spiked by seven percent on Friday, although for reasons not related to the Vanda news.
FuelCell Spikes On Dominion Deal
FuelCell Energy (FCEL): Shares of FuelCell Energy spiked by over seven percent on Friday when news hit the wires that the company, in collaboration with Dominion Resources (D), would develop the largest fuel cell power project in North America. The deal, according to Bloomberg reporting, increases the company backlog of orders to over $125 million and is a testament to the company's growing potential of supplying a significant power source independent of the grid. What has plagued this company for some time - and resulted in a dramatic share price drop from this year's highs - is the slow roll towards profitability. Like Capstone Turbine, another company in the sector which is developing clean energy microturbine units, investors have yet to embrace that profitability may be within reach over the short to mid term, compelling many to simply use the stock as a trade, rather than as a hold. Such activity leads to increased volatility and price fluctuations but also allows for accumulation and numerous trading opportunities.
This deal with Dominion, one of the largest energy companies in the nation, could be the spark that FCEL shares have needed over the past months and provide the 'foot in the door' for FuelCell to boost its U.S.-based business, following some nice overseas deals announced earlier in the year. With clean energy quickly gaining market and political acceptance - and with Hurricane Sandy exposing the need for off-the-grid stand-alone power - FuelCell could be positioned for a resurgence.
Even after Friday's spike, FCEL shares may be trading at an attractive level, based on future potential and past trading trends.
Roundup: Aside from the cliff negotiations, it could be a slow week. Not much is expected in terms of economic indicators so it'll be a week of headline watching and playing some trades, should they come up. As the days inch on - and with 2012 working days in Washington dwindling down to nothing - then investors will be getting more and more nervous at the prospects of the fiscal cliff being implemented. By voting in November to keep the powers-that-be in Washington at status quo on both sides of the isle, voters essentially put it to the task of the politicians to find some middle ground; now let's see if the egos and affiliations can be put aside to come up with a plan that the people want. In closing, let's take the time this week to remember those that need remembering and to appreciate family and friends the way we should - too often these days are we forced to remember that mortality is all too fragile. Quickly, it puts things into perspective, at least for those who pay attention.