The markets loved the fact that U.S. President Barack Obama and House Speaker John Boehner met face to face on Monday to discuss their respective proposals over how to avert the fiscal cliff, as the DOW jumped by one hundred points and the Nasdaq and S&P were also up by over a percentage point each. More than just the fact that two met, however, was that the meeting came with a counter-offer by the President to what was proposed by Mr. Boehner last week. Funny how that bipartisan and cooperation stuff works when the two sides are willing - it's refreshing to see such strategies return to Washington.
There's still much to be done, though, but the tone looks to be set that it will all get done. Cooperation does not mean instant agreement, so the two sides still need to come closer on the limit for who will receive tax hikes next year; the President's new proposal calls for increases on those earning more than $400,000 per year while Mr. Boehner's latest offer stood at a cool million/per. It's likely that the two will agree to a number in between ($500-$600k would be my guess), while they also need to agree on when to raise the next debt ceiling.
No longer does it look like that the two cannot negotiate a deal before the end of the year, but where things still might get tense is when each has to convince their respective parties to buy off on whatever it is the President and Mr. Boehner bring forward. With less than two weeks left to the year - and with the Christmas holidays taking some working days out of the mix next week - there will be little time for collective negotiations from the Democrat and Republican bodies of the government, once a preliminary deal is proposed.
So while Monday's tone is encouraging, this story is far from over.
As negotiations continue to play out, here are a few stocks and stories to keep an eye on ...
Judge Denies Apple's Request
Apple (AAPL) shares rebounded by nearly two percent on Monday as the broad markets enjoyed a nice up day in light of encouraging signs of cliff cooperation in Washington. It's also likely that shares benefited from enthusiastic reports over the weekend of the positive reception in China for the iPhone 5. In news unrelated to yesterday's trading, but news likely to be discussed on Tuesday, a Reuters report issued late Monday night announced that a judge had denied Apple's request to implement an all-out injunction on the Samsung smartphones that were found earlier in the year to have infringed on Apple's patented technology. In the ruling, the judge essentially noted that an injunction would be over and beyond the common sense realm of punishment, given that Samsung was already ordered to pay Apple over a billion dollars in retribution while also only infringing on limited aspects of its smartphones.
For investors digesting the news on Tuesday, the ruling comes as a relative non-factor. Had the ruling in fact forced the target Samsung devices from the market, Apple likely could have benefited, but the fact that they're still on the market just means that we move forward with the status quo - and any Apple concerns should be directed at the company maintaining its technological and brand dominance. When companies rely on pulling the competition off the shelves to stimulate growth, that's a sign of trouble because it means that its own technology is not impressing enough to "sell itself." Not to say that Apple is in that position, but for a pullback to occur because of this news alone, it would indicate that investors might believe Apple is losing its dominance.
That should not be considered the case just yet, but that could change. As discussed this weekend, Apple has consistently relied upon consumers buying the "latest and greatest" model of a particular product every time an update is released. Then the mini comes on the scene - which is essentially a re-packaged deal of what's already out there - and one has to ask how long is the consumer going to buy different colors and different models of a bunch of products that all pretty much do the same thing before saying "enough is enough?" Add to that fact that there are a whole lot of protests going on in China these days calling for higher wages and better working conditions. Many in America will stare at their television screens and agree that the people of China have a right to better working conditions, but then complain if the price of an iPhone were to jump as a result of better working conditions as the profit margins of Apple products shrink.
The same can be said for the news that Apple is moving a bunch of manufacturing jobs back to the U.S., too. The American worker demands more for their efforts than any other worker in the world, which costs money and leads to higher prices on products and/or lower profit margins for those products.
By no means is Apple on the brink of losing its dominance, but these are all likely some of the considerations being taken into account that justifies the profit-taking we've seen over the past weeks, especially since AAPL has returned such impressive paper gains over the past couple of years. Time to turn those paper gains into actual gains. There's never anything wrong with doing that.
Any price movement on Tuesday will likely be unrelated to the judge's ruling on Monday.
FuelCell's Price Run Continues
FuelCell Energy (FCEL): Shares of FuelCell Energy continued their surge on Monday following last week's announcement of a deal with Dominion Resources (D) to develop the largest fuel cell power project in North America. As mentioned over the weekend, this announcement came as a huge validation of the company's potential to infiltrate the clean energy market, especially on the heels of Hurricane Sandy, which greatly exposed the weaknesses of regional power grids. After a seven percent move on Friday when the deal was announced, FCEL follow-up on Monday with a push through the dollar mark on a nine percent move higher. Also in line with Friday's action, the move was supported by volume of roughly triple the daily norm, indicating that investors are taking this development seriously.
FCEL is one to keep an eye on right now. A financing deal earlier in the year valued shares at $1.50/per at the time, but the stock has traded well below that point for months. Historically speaking, dips to the dollar level or below have proven to be opportune buying times, regardless of whether intended for accumulation or quick trading purposes. Progress overseas has already been well documented this year, but the U.S. deal helps to draw attention to the growing U.S. demand for the FuelCell technology, and it doesn't help having a cheerleader like Bloomberg come out of the woodwork with a high-profile article at every critical juncture for the company.
With big volume rolling in and a fifteen percent-plus price spike, one could expect some profit taking, but this Dominion deal could lay the ground work for similar arrangements and mark the revival of FuelCell Energy over the short to mid term.
Also keep an eye out for the company's earnings report later this week. There's no expectations of profitability in the immediate future, but if investors predict this milestone can be achieved within the next year or so, then shares could respond accordingly.
The future can quickly start to become now for FuelCell.
Healthcare, Biotech, Pharmaceutical:
Titan Lands Commercial Partner For Probuphine
Titan Pharmaceuticals (OTCQB:TTNP) spiked by seven percent last Friday and made it to the Weekly Stock Watch list this week as a result, but any questions regarding the spike were solved on Monday when the company announced a milestone news event that led to a further ten percent spike in the TTNP share price. After years of awaiting confirmatory news that Titan has landed a commercial partner for its subcutaneous controlled-release treatment for opioid addiction, that news came on Monday in the form of a partnership with Braeburn Pharmaceuticals Sprl. Braeburn is wholly owned by Apple Tree Partners IV, L.P., a partnership affiliated with Apple Tree Partners. What's significant for Titan is that the deal comes with an up-front payment of nearly sixteen million dollars - alleviating a good portion of investor concerns about future financing - and potential milestones of over two hundred million dollars possible. A future royalty on sales is also a part of the agreement. Most significantly over the near term, the milestone payment for a Probuphine approval would put fifty million bucks in the bank for Titan.
Investors concerned that the company was forced to settle for a partnership with a lesser-tiered company and not a major pharmaceutical or biotech name should consider the relatively weak position that Titan was dealing from, at least financially, and the potential to reap some nice rewards in terms of milestones and royalties later on down the road. No matter how valuable a product Probuphine may be, other partnership deals could have taken the product and given terms much less lucrative to Titan than this one - especially considering that Probuphine is not yet approved.
Additionally, it's worth considering that the Apple Tree agreement positions Titan more for a potential merger or acquisition than it does for commercialization. Apple Tree is made up of industry veterans - with contacts in the industry - and they've already demonstrated the ability to consummate high profile deals by delivering Gloucester Pharmaceuticals to Celgene (CELG) a while back and have also demonstrated the ability to manage the commercialization and/or development of other companies, such as HeartWare International (HTWR) and Aileron Therapeutics. This could turn out to be a pretty good deal for Titan and its shareholders.
With the partnership deal done and non-refundable up-front cash in the bank, it's all eyes on the Probuphine approval decision. Expect TTNP, with some volatility assumed, to rally at points leading into the decision, with a push towards two likely at some point during that time.
Inovio Volume Boost Indicates Accumulation
Shares of Inovio Pharmaceuticals (INO) have been trading with consistently higher volume through the month of December thus far, besting the daily norm each day, bar two. The volume spike could be an indication of accumulation for investors who have eyes towards the mid to long term progression of the company's deep pipeline - which includes nine programs in development, three of which are in Phase II stages (and six of which are funded with the help of third party collaboration) - while short term potential also exists, given the volatile and speculative moves that the stock has already demonstrated this year.
As noted above, the company has nine programs currently in development, some of which could produce actual or interim trial results through the course of 2013. Potentially the most-watched story will be the progress surrounding Inovio's universal flu vaccines, based on its proprietary SynCon platform, which produces synthetic vaccines to treat various infectious diseases and cancer types. Just recently the company announced interim results from an ongoing Phase I trial demonstrating that Inovio's universal H1N1 vaccine proved to be twice as effective as the current standard of care and additional updates next year could prove as a catalyst for the INO share price as trials mature and/or finalize. Updates on other ongoing trials are expected in 2013, also a reason why investors may be taking advantage of the current prices to accumulate shares.
In conjunction with the SynCon platform, Inovio is also advancing its novel electroporation process through development. As described on Inovio's website, uses controlled, millisecond electrical pulses to create temporary pores in the cell membrane and allow dramatic cellular uptake of a synthetic DNA vaccine previously injected into muscle or skin. This technology allows Inovio to more accurately and effectively direct its vaccine technology into the intended cells and has thus far proven successful in practice.
The combination of the SynCon pipeline and the electroporation delivery technology could have the company positioned to reach multiple clinical milestones during the coming year, as mentioned above.
The pipeline is still only in Phase II trials, however, meaning that the company is still highly speculative and will be susceptible to volatile peaks and valleys along the way, as demonstrated already this year. That said, speculative investors look to buy into a good story before the most significant percentage gains can be had, hence some of the possible accumulation we've seen recently. It also helps for both the longs and traders that there is enough cash on hand to last well into 2013, according to recent reports, allowing for longer rallies and possibly sustained higher prices, should they materialize.
While keeping in mind the speculative nature of INO, it could be a nice accumulation pick at the current levels with an eye towards the development of SynCon and electroporation. Judging by this end-of-year uptick in volume, other investors may agree.
Roundup: Concessions from both sides sparked an early week stock market rally and any continued positive progress in the cliff negotiations could fuel the run further, but also bear in mind that a deal is still far from done, as mentioned in the open. Individual investors should stick to their entry and exit strategies (that should be devised before investing in a particular stock), in my opinion, as the story rolls along. Of course the idea of keeping some cash in hand to play into any market dip still looks good. Early indications on Tuesday are that another up day is in the works - at least at the open.