At the conclusion of each week, VFC's Stock House examines some news items, stocks and stories that made headlines during the previous trading week, but may also make headlines or influence trends during the upcoming week as well.
The markets opened the week relatively flat again this week as pundits more forcibly predicted that a broad market downturn may ultimately take effect, citing some high-profile profit warnings as the earnings season kicks off. In addition to the expected earnings weakness, recent comments from the International Monetary Fund have also emphasized the growing risk of another all-out global recession, words strong enough to see European shares sputter early this week. Other causes of concern revolve around increasing tensions in the Middle East and the threat of the Syrian civil war stretching to other nations in the region, such as Turkey.
Politics may also come into play as we enter the final countdown phase of the US Presidential race. Due to a bullish debate performance by incumbent President Barack Obama last week the race is a little tighter than previously anticipated and my throw some uncertainties the way of investors who may have considered the November elections as a mere formality when Obama had a compelling lead in the polls. Given the turmoil around the globe right now, the political mood could change quickly and investors will have this in mind as the weeks become days before the November 4th US vote.
There was some good news, though, to go along with all the words of caution. The US unemployment rate dropped to below 8% for the first time in quite a while, auto sales remain strong and some companies, such as Sirius XM Radio Inc. (SIRI) may actually have an earnings surprise in store. All the while investors can continue to expect debate about the health of the overall economy and some uncertainty about where it's going, priming the next few weeks to be ones filled with a solid news flow as the bulls and bears play it out.
As always, with all the distractions going on in the world, there's always a few stocks and stories to keep an eye on. Here's just a few of them...
Technology, Products, Services:
Sirius XM Radio Inc. (SIRI): As mentioned above, SiriusXM is one company that has demonstrated bullish signs over the recent past and may have gained enough momentum to spark a surprise or two in its upcoming earnings report. Some analysts and reporters have noted recently that the company may have added more subscriptions than previously anticipated during the most recently-completed quarter as the result of surprisingly positive auto sales numbers for the month of September. Given that Sirius equipment is installed in about seventy percent of new cars in the United States, SiriusXM tends to roll in line with the auto industry.
While the October 30th company conference call is the date to track for the official earnings release, the company could be in the highlight this week, too, with Liberty Media's (LMCA) analyst meeting scheduled for Wednesday. Liberty's methodical and increasing position in SIRI has helped to fuel the recent share price run, which culminated in the stock reaching multi-year highs last week on the heels of positive Bank of America (BAC) coverage.
Attention will be paid the company during Liberty's mid-week conference, so it's worth keeping in mind that some might like to play the 'sell the news' game, but the October 30th earnings date will likely provide a solid foundation of information for which investors can gauge future confidence and strategies in the stock. SIRI has a tendency to pull back following quick share price runs, but the bulls have been winning this battle and developments have been unfolding in a manner positive enough for the company and its shareholders that it is worth keeping this one as a hot stock to watch.
Healthcare, Biotech, Pharmaceutical:
AEterna Zentaris (AEZS): AEterna shares were on the dive last week following the announcement and then quick implementation of a reverse split (RS). Reverse splits are rarely kind to a company's share price when such an action is undertaken because, for the most part, an RS is implemented from a position of weakness, keeping investors squeamish about the prospects for the future. In the case of AEterna, the RS was implemented on a one for six basis in order to maintain the NASDAQ's minimum listing requirements. Shares dropped 26% in value last week on the news, but rebounded by over eight percent to open the new trading week as some investors may have felt the dramatic drop in market cap might not have been justified, given the developing pipeline that has reached the point of possible near-to-mid term fruition.
The company's fairly deep pipeline consists of Perifisone in the treatment of multiple myeloma (MM), AEZS-130 as a diagnostic test for Adult Growth Hormone Deficiency (AGHD) (already proven successful in Phase III trials) and AEZS-108, another anti-cancer agent that has already proven successful in multiple Phase II trials. The company plans to file an NDA with the FDA early next year for AEZS-130 while AEZS-108 is being prepared for a near-term launch of a Phase III trial for endometrial cancer with other earlier-stage trials still planned. There may be some hesitation by investors to jump into any Perifisone enthusiasm based on a failed clinical trial earlier this year for metastatic colorectal cancer when the product was partnered with Keryx Biopharmaceuticals (KERX), but the MM condition could offer the product new life.
A volatile ride may still be in store for this company moving forward as investors digest the prospects of additional funding terms down the road, but continued pipeline success could go a long way to reinvigorating investors interest following the RS. Additionally, Roth Capital's price target of $10.50 per share (adjusted from the pre-split price of $1.75) remains in tact as nothing has changed in terms of the pipeline development that formed the foundation of the analytic report.
Given the recent volatility, pending AEZS-130 NDA filing for early next year and positive analyst coverage, AEZS remains a stock to watch for this week, and probably beyond.
Neostem, Inc. (NBS): Shares of Neostem opened the new trading week on a high note with a six percent move on Monday following the publishing of studies marking the potential of the company's stem cell pipeline that has positioned it as an emerging leader in the field. The data, as presented as a collaborative effort with the University of Michigan School of Dentistry, highlights the growing potential of Neostem's proprietary VSELS (very small embryonic-like stem cells) regenerative technology and its effects in forming "human bone when implanted in the bone tissue of SCID mice." Although still early in development and a ways away from market potential, the published report is another sign of validation to support Neostem's move into the mainstream of regenerative medicine.
Currently, Neostem is most noted for its most advanced treatment candidate, AMR-001, which is designed to repair damaged heart tissue following a heart attack and - as a result of the regenerative aspects of the treatment - to also prevent major cardiac events from re-occurring. The treatment has already successfully completed Phase I trials and the Phase II PreSERVE trial is already underway with results expected to start rolling in during the latter half of 2013. The sheer size of the multi-billion dollar market being targeted by this treatment - not to mention the potentially-breakthrough stem-cell technology behind it - has Neostem longs positioning for success, although some will also note the potential of an eventual reverse split being implemented and the further need for additional funding, aside from the measures to boost the reserves already this year.
Neostem also received positive coverage over the weekend from Seeking Alpha, which could possibly be another factor behind Monday's share price rise.
As regenerative medicine continues its move to the head of the class of next-generation medicine, it's worth keeping companies like Neostem on the radar. Because of the recent price action that followed the publication of study data this week, Neostem is one to keep an eye on for the short term.
Valor Gold Corp (VGLD): Valor Gold saw some increased price action last month as the company continued to advance its plans of fully exploiting Nevada's remaining gold deposits, but volume had since tapered off before picking up again over the past few trading sessions, marking a potential new round of investor interest in the company. The gold and mining sector generally receives a reinvigorated boost any time the overall market sentiment turns bearish and predictions of slowing economic growth circulate the headlines, and since that is the general mood of the day, Valor may be benefiting along with the sector as a whole.
Although still a risky proposition because of the speculative nature behind gold and mining start-ups, Valor holds some potential for eventual payoff and is worth watching as new volume starts to roll into the stock. The company controls 8,000 acres of land in the prolific Battle Mountain-Eureka Gold Belt of the Northern Nevada Rift and has already discovered surface and shallow-drilled gold on its Red Rock property. The management team is compiled of long-standing members of the international mining sector and the company's Chief Geologist has strong ties to not only Nevada exploration as a whole, but also to many of the larger companies in the field that have already explored the region.
If the economic news continues to dim - as it has this week - then companies in the mining and gold sector could gain additional attention. With a modest boost in volume and the prospects of Valor Gold exploring its Nevada properties over the coming months, this could be a stock to watch.
Roundup: The Weekly Stock Watch is out a day or two late this week, but there's something to be said for still celebrating Columbus Day in these parts. Earnings season will provide the bulk of market entertainment for about the next six weeks, but political developments regarding the US elections and events abroad could all factor heavily into the the short and mid-term trading patterns of the global markets. Oil is again becoming a factor as the situation in Syria looks to threaten region stability and political leaders are on check as economic events in Europe continue to transpire. Some nice distractors will also play out in sports where the MLB playoffs are in full swing and Eli's Giants recovered from a shaky start on Sunday to pummel Cleveland. And if you haven't had enough of it yet - the presidential politics is dominating the airwaves, and it's almost comical to see how worked up some people get over this stuff.
As always, keep an eye on those stocks, and invest mainly on some solid DD.
Disclosure: No positions.
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