Pipex Pharmaceuticals Soars on Business Week Feature

Pipex Pharmaceuticals (PP) is up 40% in the past week and nobody's even talking buyout. Interestingly, a news item in a large publication can amplify interest in a small stock like Pipex more than your typical holding.

The stock has been gradually rising for some time now, but on July 20, 2007, the stock rocketed 13% following a feature in Business Week's Inside Wall Street column. The next day, it continued to run, for a combined return of 41% over the past 5 sessions.

This influential column has a tendency to temporarily improve the fortunes of the companies it features. In fact, this column has been so influential in the past, that employees from a printing company which distributed the magazine were busted for insider trading because they were trading on the stocks highlighted prior to delivery of the magazine by the postal service. They amassed 6 figure profits until they were discovered.

Is now an optimal entry point? It's very tough to say given the speculative nature of a small biotech banking on approval of new drugs. The same stock dropped from 16 to 4 on Feb 14 - Happy Valentine's Day. But given the rationale outlined in the article, it has promise. And, given the momentum over the past week and lack of follow-on press, it's possible to see more big moves up in the coming days.

This case just highlights the result of influential coverage. The fundamentals of the company did not change overnight. There were no press releases divulging new information to the public. But up it went. Barron's, The Wall Street Journal and others have a similar effect now and then. The trick is picking which ones have merit, and won't return to their baseline in a few days.

Below is a comparison to a Biotech ETF (BBH), which granted, doesn't have the same holdings due to the larger market capitalization makeup, but provided for a better comparison than the S&P 500.

click to enlarge

Disclosure: The author does not hold a position at this time.