An Update On 7 Potential Big Movers

by: Bill Maurer

About a month ago, I published an article called 7 Stocks that could move big in future months. Two of the companies I noted had upcoming earnings announcements, Green Mountain Coffee Roasters (GMCR) and Sodastream (SODA). Two of the names were involved in buyout rumors, Interdigital (IDCC) and Walter Energy (WLT). Two of the names had just experienced large drops, Netflix (NFLX) and Dendreon (DNDN). The last one was Sprint (S), which had just started selling the iPhone. It has been a quite volatile month for the markets. We've seen some big point swings lately, mostly depending on news out of Europe. Since my article was finished on November 7th, the S&P 500 has traded in a 119 point range. For one month, that could seem large to many. However, over that same time period, the index is down 6 points, or less than half of one percent. The index hit its high point the day the article was published, November 8th, and its low was hit at the close on November 25th, the Friday before we saw the huge market rally begin. So here are how the seven potential big movers have fared since then. As you can see from the table, five of the seven have moved in double digits, with all seven moving in large ranges.

Company 11/7 12/9 Change High Low
Sprint Nextel (NYSE:S) $2.91 $2.47 -15.12% $2.94 $2.34
Interdigital (NASDAQ:IDCC) $44.18 $42.42 -3.98% $51.40 $40.35
Walter Energy (NYSE:WLT) $76.01 $67.14 -11.67% $79.43 $62.76
Dendreon (NASDAQ:DNDN) $6.69 $7.96 18.98% $9.09 $6.93
Netflix (NASDAQ:NFLX) $90.83 $70.89 -21.95% $92.60 $62.37
Sodastream (NASDAQ:SODA) $35.35 $36.35 2.83% $39.50 $27.60
Green Mountain (NASDAQ:GMCR) $70.31 $58.44 -16.88% $72.27 $34.06

So let's get down to the updates on each.

Sprint (S): Sprint shares continue to remain under pressure as investors wait for the benefits of the iPhone. The company has seen its shares drop 15% over the past month, and they have again fallen below the $2.50 level. The company has continued to build itself up for the future by investing in its network and infrastructure. Sprint added $4 billion of new debt recently, but it did use some of those proceeds to pay off the $2.25 billion that was coming due next March. The company is still losing billions per year, and that is expected to continue through 2012 at least. Hopefully, some of these investments the company has made, along with the iPhone, can get this company back on track over the next year or two.

Interdigital (IDCC): On a larger percentage basis, Interdigital has mostly followed the directional movement of the NASDAQ over the past month. There hasn't been a ton of news on the name lately, other than the usual updates on which money managers and hedge funds have positions in the company. The company also declared its quarterly dividend, and that's about it. The auction process is still dragging on, leaving many to speculate if a buyout will ever come. I would assume most people would have thought that the buyout process would have been completed by now, but auctions can drag on. Given that the name is currently fetching less than half of what many expect a purchase price could be, expect this name to remain volatile until we get more clarity on the company's sale.

Walter Energy (WLT): Walter's stock performance has gone back to trading on fundamentals after a couple of buyout rumors over the past few months. Twice we have seen the name jump on rumors, only to see shares back down and even go lower than where they started. Walter supplies coal to the steel industry, and is very dependent on a strong global economy. Analyst estimates for this quarter as well as the full year and next year continue to come down. This year's estimates have come down from $7.42 to $3 in the past 90 days, and 2012 estimates have come down from $12.44 to $8.83. Walter trades at a decent valuation and has decent margins, but unless we get more economic clarity, the only way these shares rocket higher is on a buyout.

Dendreon (DNDN): Dendreon shares have rebounded a bit after the early November fall when another biotech firm announced progress on their prostate cancer treatment. Dendreon, largely dependent on the success of its treatment, Provenge, has seen shares fall from $44 to $8 after a series of revenue and earnings disappointments. Provenge sales have lagged what many have hoped for, knocking down shares again and again. Dendreon is known for its large price movements, in both directions, so just as easily as good news could send this back to $20, $30, or more, bad news could easily take it back down to $2 or less, where it was when the latest rally started in 2009.

Netflix (NFLX): Netflix shares saw a nice rebound after the last quarterly blowup, but since my last article, the shares have gone down again, this time to even lower levels. Shares hit a recent low just above $62, and are trading at $71 currently; it seems like an excellent short. Analyst estimates have held up over the last week or so, but after the major downward revisions we've seen lately, that's not entirely comforting to those who are long the stock. I expect shares to remain volatile, especially given management's recent issues over how to proceed with the future of the company.

Sodastream (SODA): Shares of the make your own soda at home company have been one of this year's battleground stocks, and I don't see that changing anytime soon. With a market cap of just $727 million, and a float of about 15 million shares at last report, this stock is set up to move big. Average volume equals about 10% of float, and there is a large number of shares short in the name. The company's latest earnings report was good, but the stock hasn't done much since. In fact, it's traded mostly lower with the markets.

Green Mountain Coffee Roasters (GMCR): Since my original article, Green Mountain posted its quarterly earnings report. While they beat on the bottom line, a huge revenue miss led to some serious questions about the company's potential future growth. The stock lost nearly half its value, and that was after it had already lost plenty due to the negative presentation given by Hedge Fund Manager David Einhorn. However, the stock has rebounded sharply over the past few weeks, and with a couple more good days, could totally eliminate all of the post-earnings losses. Given the expected 60% revenue growth this fiscal year (ending in September 2012), this stock will be another battleground as the bulls and bears continue to fight it out.

These seven names have moved quite a bit in recent months, and expect that trend to continue going forward. I currently have Green Mountain, Netflix, and Sprint in my theoretical short portfolio, but I may change some of those holdings by the end of the year. In my model options portfolio, I currently hold Interdigital calls, as I think that's the smartest way to play a potential buyout. You want to be in if a buyout occurs, but it is wise to limit your risk just in case it doesn't. As for the other names, Walter will depend on a global economic recovery and a strong steel industry, Dendreon will depend on Provenge, and Sodastream will depend on discretionary spending. For anyone looking for stocks that will move in either direction, continue to keep an eye on these seven names.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.