Another day, another DOW record. The boost provided by last week's encouraging jobs report looks to have carried over into the new trading week while it also looks like investors are continuing to brush off any negative effects that could come into play as a result of sequestration. Those predicted effects my never come into play anyway, given the fact that Washington has issued itself a new deadline to reach a budget agreement and our elected officials are talking to each other again - after cringing at the bad press both sides received as the last deadline expired.
Shares continue to inch higher, defying the odds and the predictions of most experts and analysts, but at some point investors should assume that "what goes up" has to pull back and consolidate, especially with the amount of uncertainty still existing on a global scale. The U.S. recovery looks solid, given the most recent jobs numbers, but it wasn't too long ago that GDP was reported as down to flat. We also cannot ignore the fact that budget cuts in Washington are likely coming - sooner rather than later - and the impact of cuts made now likely won't be seen until a month or two down the road.
Additionally, the Fed cannot maintain its current rate of stimulus forever. At some point the training wheels will have to come off. None of this should turn into a market collapse by any means, but investors should look at profits taken during this record-breaking run as a nice solid cash position to hold onto until either a broad-based pullback occurs, or to use as a reserve in case a nice individual stock opportunity shows up in the middle of everything. It's not a wise idea, in my opinion, to chase the market higher, if one is not already in. 'Chasing' the market or an individual stock as it rallies could be a dangerous game, as the biggest percentage gains were already had. Quick-moves to the upside also invite short sellers that at some point will want to weigh the rally down in order for them, too, to profit.
Patience is the game in the stock market. A few years ago when the markets crashed many panicked and sold as their 401ks were sliced in half, at least. Without doing anything those depleted accounts would be full again, given today's new record highs, and even more so for those that used the drop as an opportunity to buy, even when others said to sell. It's a game of peaks and valleys, and although buying at the peaks pays off, too, if the market goes higher and higher, the largest gains come from having the patience to buy heaviest into the valleys.
Even with the nice, upward arrow from the markets as a whole these days, there are still plenty of individual stocks and stories to keep an eye on. Here are just a few of them for Tuesday, 12 March, 2013 ...
AEterna Drops After Another Perifisone Failure
Shares of AEterna Zentaris (NASDAQ:AEZS) were hammered on Monday after the company announced that it would - at the recommendation of an independent data and safety monitoring committee - discontinue its ongoing Perifisone trial in the treatment of multiple myeloma. According to the committee, the trial endpoint was unlikely to be reached. This news essentially puts to rest any future for the drug Perifisone, which also failed a Phase III colorectal cancer study that was conducted in coordination with Keryx Biopharmaceuticals (NASDAQ:KERX). At the time of that trial failure, shares of both Keryx and AEterna dropped and emphasized the risks of investing in the speculative biotech/developmental healthcare sector. For a full synopsis of these events and for additional insight into why it's often a better play to trade these speculative picks while also building a core position, read a previous entry written after the Perifisone failure of 2012.
In terms of AEterna, the Perifisone failure of this week dropped shares by well over twenty percent and drew its share of negative press, but there are a few points to consider to maintain balance and refrain from overreacting. For example, while the Perifisone data review was regarding as the most imminent potential catalyst for the company, many viewed the product skeptically after the failed colorectal cancer trial. It was somewhat regarded, too, that the product was hardly even priced into the AEZS share price or market cap, and evidence to that regard may be Monday's drop that - while viewed as significant when taken only as a daily snapshot - really only returned shares to where they were trading before the rally earlier in the year that was based on nothing other than a possible association with KERX, which jumped big on the successful results of its Zerenex trial.
AEZS shares, again, rallied from prices near where they are today on the basis of no news related to the stock itself. Such rallies in this speculative sector, often attract short sellers, too, who are all too aware that swift dips often follow quick rallies. Monday's decline, while highly regarded solely as the result of the failed Perifisone trial, was more likely the result of opportune shorts looking to bank profits of their own.
As described after Keryx offered us a swift dose of reality last year, investors of the sector often take into account the pipeline as a whole when entertaining a potential buy. In the Keryx example, Zerenex provided the "Plan B" that the company needed in order to succeed and shares reached a point that were well more than triple from the lows achieved after the failed Perifisone trial when that product proved successful in Phase III trials earlier this year.
Since investors can completely disregard Perfisone, attention will be paid to the rest of the pipeline, which still makes AEterna worth a decent speculative look, especially after the recent collapse. The pipeline product remaining with the most potential, AEZS-108, is slated to return interim results or updates over the coming quarters and could provide multiple price and volume catalysts for a potential rebound along the way. These updates will be compiled from ongoing Phase II trials for the treatment of prostate and bladder and - if encouraging - may give a clear indication that the company has a very solid "Plan B" after the second Perifisone failure. AEZS-108 has already proven successful in multiple Phase II trials and is also being prepared for a near-term launch of a Phase III trial in the indication of endometrial cancer, according to the latest information published to the company's website.
As another near term catalyst, an NDA filing with the FDA for AEZS-130 as a diagnostic test for Adult Growth Hormone Deficiency is slated for within the current quarter. Although not expected to be a huge money maker, AEterna maintains world-wide rights to the product, which has previously been slapped with an orphan drug designation. This milestone event may at the least attract attention to the company's pipeline, and at the most provide a modest-to-decent catalyst over the short term.
Trial failures are common in this speculative sector, and should be expected. That is why solid due diligence also investigates the rest of the pipeline, so as not to be trapped by a 'one trick pony.' It's also why we like to emphasize the benefits of using a strategy that includes selling into spikes with a handful of 'trading shares' while also potentially building a core position of long shares to see the whole story play out. With the bad news out of the way and Perifisone out of the picture, investors can look to AEZS-108 and 130 as the new course for the future and entertain speculative buying strategies from there. Keryx showed us that a company can recover - and fairly quickly - from trial failures, and Monday's AEZS drop offers investors a chance to take a look at prices that are relatively similar to where they were late last year. AEZS-108 is not as advanced as Zerenex was at the time of the Perifisone failure, so a recovery as significant as KERX's may be out of the question for the short term, but there is room in the AEZS for another speculative move higher, especially after Monday's 20%-plus drop.
With the AEZS-130 catalyst still on tap over the near term, and AEZS-108 slated to return at least interim results throughout the year, AEterna remains a story to keep on the radar.
BlackBerry Rebounds On Takeover Chatter And Pending Launch
After grabbing attention last week after a price slide that materialized while the DOW was setting record highs, BlackBerry (BBRY) shares rebounded to the tune of a fourteen percent gain on Monday as rumors of a potential buyout circulated while the pending U.S. launch of the new Z10 also made headlines. As has been the case in the healthcare sector when buyout rumors pop up lately, the BlackBerry chatter originated in Europe and referenced the Chinese firm Lenovo Group Ltd. (OTCPK:LNVGF) as a potential suitor. Such speculation has been discussed before, but as noted in the above-linked headline, few give the speculation any credence - at least not over the short term.
What has investors excited, however, is the pending U.S. launch of the new Z10, the first release of the new BlackBerry 10 platform on which the company has based its revival. AT&T (NYSE:T) will officially launch the Z10 on 22 March and investor hopes are high, especially given the hype created after the global launch commenced earlier this year. As discussed over the weekend, BBRY has its work cut out in order to regain a portion of the market share lost to Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) over the years, but it's not out of the question that the Z10 could make an immediate splash, given the building hype and the nature of the consumer, who is more often than not willing to give any new fad or product a try.
For the time being, investors should entertain caution into chasing a rally based on buyout rumors. Comments from the company and analysts have disregarded such talk so far this week and enthusiasm should solely be geared to the U.S. launch, sales numbers from overseas and the solid cash position that the company is sitting on. Since BlackBerry's market share lost on the international market was never as drastic as it was in the U.S. - especially in terms of business customers - acceptance of the BB10 platform in the U.S. is viewed as key for a turnaround, and that is evidenced by the company looking to create the hype it did by launching overseas first.
With less than two weeks to go now before BB10 enters America, the hype and rumors will swirl. A healthy round of international sales numbers would help to fuel Monday's rally, but investors should also take note of the high short interest. Should the market as a whole take a dip, then BBRY would be susceptible to one as well. For those looking to play the rebound story, any dip may be worth buying into. Until solid launch numbers are known, however, it may still be a tad too early to recommend jumping "all in."
Still a hot one to watch this week.
Explosive Trace Detection (ETD) / Global Defense:
Implant To Showcase Technology In High Growth Market
Shares of Implant Sciences (IMSC.PK) have trended lower since the company received approval for its Quantum Sniffer B220 explosive trace detector from the TSA for use in air cargo screening earlier this year, but the pullback may provide investors looking towards the long term - and those who may have taken advantage of the post-approval spike and sold some trading shares - an opportunity to accumulate or reload as the company has made key strides over the past few weeks worth noting. As previously discussed, a renegotiated deal with Implant's primary creditor, DMRJ Group, lays solid financial groundwork for the foreseeable future and alleviates concerns of financing worries while the company implements its post-approval growth plan.
While much of that plan includes moving into the domestic air cargo screening market, recent reports indicate that the company's Sniffer technology may have more wide-scale use in the airport security sector as the TSA once again is gaining negative attention for missing fake bombs.
As investors await news regarding domestic sales, Implant has continued to make strides in other high-threat markets, specifically in Africa and Asia, and it's in that latter region where the company is slated to showcase its technology at a high profile event. According to a Monday press release, Implant will present at Global Security Asia 2013, the region's premier conference on anti-terrorism and internal security. The event will be held in Singapore.
As mentioned above, Implant has landed numerous orders and reorders from various areas of Asia over the past year, including a six million dollar order from India, and expectations are that this region could provide a significant avenue of growth from the company while business in other markets picks up. Governments and civilian security operations are looking for ways to streamline and improve anti-terrorism activities, and exposure received during the upcoming conference could help to put Implant on the map and spark additional sales negotiations.
Until sales come in on a more consistent basis, however, or until it looks like infiltration into the domestic market is being made as a result of the TSA approval, investors should assume that the stock is going to trade with continued volatility. Volume has tapered off quite a bit as the hype surrounding the approval died down, and that may be a sign that investors are accumulating and refusing to sell positions, but it's also worth emphasizing that many investors will not entertain stocks that trade on the OTC markets. Company officials have discussed a move to one of the big boards in the past, but have also exercised caution in doing so too soon as such a move would require resources and finances that may be better geared towards production and development at this point.
It's still very early in the growth game for Implant Sciences, but Asia has been a key growth market over the past year and Monday's announcement that it will participate in the region's premier security conference next month should not go unnoticed. With shares sliding from their post-approval highs, this is still a story to watch.
Roundup: After another record-setting day for the DOW, the international markets opened soft on Tuesday and U.S. futures are trading modestly in the red, too. There's little threat of an all-out reversal in the uptrend experienced by the U.S. markets so far this year, but any slowdown in the uptrend could indicate that investors may be starting to entertain skepticism that the rally can or will continue, and some news headlines circulating during the early-morning hours indicate that the pundits may be turning negative again. As mentioned in the open, it's tempting to chase a rally higher, but the best move may be to sit and wait for a pullback or period of consolidation before jumping in again. History shows us that no rally lasts forever before investors say "enough is enough" and start banking profits. There still looks to be plenty of individual stocks and stories out there that may be worth a look, independent of the broad market action, to keep us busy.
Disclosure: I am long IMSC.PK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.