During this article I will be looking at 7 stocks with strong movement to the upside or the downside. During the last week there have been several volatile stocks and these stocks, are just a few of the more volatile over the last couple days. Yet the question that investors should be asking is if the movement of these stocks has any long-term relevance. I will try and determine the true meaning of the news that moved these stocks and hopefully find value and a way for investors to return additional gains or protect gains with the following investments.
Mitcham Industries (MIND) had posted a gain of 19% through the 5 days prior to Wednesday. However, after posting a 3Q profit that soared to $6.8 million from $727,000 year-over-year the stock is trading with a 20% gain on Wednesday. The company had predicted strong results in China and Russia, yet no one expected profits to rise by this level. In addition to strong earnings the company posted revenue of $28 million and most believe this quarter is the start of something special for this company. I'm buying on this news and believe its global presence is growing and expanding and that earnings will continue to grow from this point.
RIT Technologies (RITT) is an unusual play that has the ability to post large gains in a short period of time with little news. The stock increased by near 40% on Tuesday after expanding its presence in Africa. And although this news may not seem like company changing news, the stock has a tendency to react on any news. Such as in June when the company was chosen to partner with Samsung Fiber Optics for an unknown amount. This partnership resulted in a stock that gained more than 250% in a matter of days. Therefore I'm buying this news on expanding in China but I consider this to be a bit more risky and I doubt it will return another 250% in gains.
Darden Restaurants (DRI) fell by more than 12% on Tuesday after lowering its 2Q guidance, along with its full year guidance, below analyst expectations. The company's now expecting growth of 6-7% year-over-year, which isn't bad, but it's the margins that are scaring investors. I personally don't have a problem with the news, but I wouldn't buy the stock just yet. I still think Darden is a great company but that the economy has taken its toll on costs. I think the stock will fall slightly lower, but then it will make a good investment. The stock has a yield of 4.11 and the company's dealt with adversity before; therefore I believe this is simply a bump in the road and that DRI will return gains for investors that buy at this low price and will capitalize on a strong yield.
Men's Wearhouse (MW) is currently trading with a 10% gain after posting earnings that increased 39%. MW has been one of the more volatile stocks in the retail industry trading 60% more volatile than the market. Therefore I'm not surprised that its stock is trading with such gains. However, I am surprised that the market didn't react to the company issuing 4Q EPS guidance below analyst estimates. I am not buying on this news because, even though the company's showing progress, I believe there are better plays in the retail space, and I would sell on this news with lower guidance for the future.
Talbots (TLB) is trading with a gain of more than 60% after Sycamore Partners made a $212 million offer to acquire the company. This company's revenue has consistently declined over the last four years, and is now operating with a loss. And even though an offer's been, made I still wouldn't buy this stock. Because with a 60% gain, even if the company gets acquired, it won't be much of a premium from its current position. But if for some reason the company didn't accept the deal, then investors would lose a substantial amount of their gains. If I owned stock in this company, I would take my profits and move on to the next investment, because if this deal doesn't occur, it could be bad for investors.
AMR Corporation (AMR) has posted a three-day gain of 115% after a change in management and encouraging developments regarding its debt has created some optimism among investors. However, the company has filed for bankruptcy, and I can't find one good reason that the stock would post such large gains. The stock's fallen by nearly 90% over the last year, and now trades with a market cap of $280 million, and I believe it's simply being shorted or manipulated for quick gains. The stock trades with an incredible amount of volume, considering its cap, which can produce large gains if investors are all trading the same way. However, I wouldn't try to get in on the gains, because once the buyers start selling, it could result in another domino effect -- but this time it will be losses.
Martha Stewart Living Omnimedia (MSO) is trading with gains of near 30% after announcing a partnership with J.C. Penney (NYSE:JCP). The company's margins have been declining and its revenue is growing at a near stalled rate. However, I am buying this alliance and believe it could open new doors of opportunity for this company. The 10-year, $200 million deal will create a unique and comprehensive retail experience that features Martha Stewart products. The two companies will also develop an e-commerce site, and JCP will pay MSO investors a special $0.25 dividend for those who hold the stock up until December 19. Honestly, I see no problems with this partnership, and I don't see any way that this deal is negative or won't produce additional revenue. This is good news for both companies, and will give both MSO and JCP an edge over the competition.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.