Tag - Blk

As of press time, 4:00 P.M. Eastern, stocks on the broader indices were up. The Dow was down 2.49 points to 8,762, the Nasdaq up 17.73 points to 1,860.13, and the S&P 500 was up 3.22 points to 942.42.

The Russell 2000, the index tracking the 2,000 largest small cap stocks, was up 4.02 points, or 0.77%, to 528.57.

Leading today's small cap gainers was Sequenom (Nasdaq:SQNM) up 45.97%. Sequenom provides genetic analysis products for biomedical research, molecular medicine, and non-invasive prenatal testing. As I've been saying for the past couple weeks, the sector rotation to defensive stocks like biotech and healthcare has started.

Other small caps showing leadership today include Spreadtrum Communications (Nasdaq:SPRD) up 23.76%; Satyam Computer Services (NYSE:SAY) up 34.93% on surprising the market with profits from the December quarter; Movado Group (NYSE:MOV) up 25.8%; and American Axle & Manufacturing (NYSE:AXL) up 22.45% after having broken through it's 200 day moving average for the second time since over a year ago and despite reporting that it will encounter production shutdowns due to the bankruptcy proceedings of General Motors (OTC:GMGMQ.PK) and Chrysler.

Showing the wrong kind of leadership in today's session-that is, the biggest decliner-was youth fashion creator Quiksilver (NYSE:ZQK) shedding 20.17% off it's opening price to be at $2.88 at press time. Shares dropped precipitously after it was announced that Quiksilver's profit was a penny shy of analysts' estimates.

Other stocks with investors seeing red today include LCA-Vision (Nasdaq:LCAV), provider of LasikPlus, down 14.11%; famed golf equipment maker Callaway Golf (NYSE:ELY) down 15.8% on news of it's dividend cut from 7 cents per share to just one cent per share; CBL & Associates Properties (NYSE:CBL) down 12.8% after releasing its full year outlook below consensus expectations and announcing an offering of 50 million shares of common stock.

*****Bravo. The government's handling of the financial crisis and recovery should be recognized as a masterful performance. At least, so long as you don't look too deeply into the numbers…

Bernanke and Co. have managed to restore confidence to the point that economist Paul Krugman has joined the ranks of those who think we are only a couple months away from actual GDP growth.

And they've accomplished this remarkable feat by stringing investors along with one carrot after another…

*****The first carrot was bailouts and stimulus packages. There was a time when stimulus spending was going to save or create 3.5 million jobs. Now, states are wondering where the stimulus money is. And the president is now promising 600,000 jobs will be created by stimulus spending.

But layoffs have slowed considerably according to the most recent non-farm payroll report. And Americans, feeling more secure in their jobs, may not notice that stimulus jobs won't be there, even if they need them.

*****The Public-Private Investment Program (PPIP) was supposed to remove toxic assets from bank balance sheets. Never mind that the banks probably never had any intention of selling at fire-sale prices and investors weren't thrilled with paying unreasonable prices, no matter how much of the transaction would be funded by the Treasury.

Geithner's "stress tests" resulted in banks raising their capital bases. That has helped remove the incentive to dump those toxic assets. 

And as for the $74 billion banks have raised so far, do not misunderstand all the talk of "green shoots". These green shoots were not economic recovery per se. Rather, the green shoots were the banks stock prices shooting higher after accounting rule changes allowed them to show a profit where there was none.

In other words, the economic recovery is something akin to an illusion -- those inflated stock prices have allowed the banks to raise enough capital to appear healthy and last a little while longer…

*****Now that investors have breathed a sigh of relief that the problems with the auto industry are being resolved, the Chrysler sale to Fiat has been put on hold. Funny, I would swear a couple weeks ago, Chrysler would go bankrupt and millions would lose their job if Fiat didn't buy Chrysler right away.

*****And then there's TARP - the $700 billion boondoggle. Some banks have been asking to repay the money for months. But ever-sensitive to the all-important timing element of a good comedy, the Treasury has been unwilling to accept payment.

After all, why spoil the party by letting all the good news out at once? Why not wait until the rally is looking weak to release the news that, hey, maybe we'll accept TARP repayments after all? And maybe those payments will be more than anyone expects?

But let's make sure we string the announcement out as long as possible and let the threat of good news keep the bears at bay…

*****Of course, you can only fool all of the people for a while. Eventually, without a real pickup in economic activity, the millions of Americans who are barely keeping their head above water will sink. And then all the issues the "stress tests" glossed over (higher unemployment, rising foreclosure rate, etc.) will cripple the banks once again.

As economist Joseph Stiglitz of Columbia University recently told Bloomberg: "There's a chance that it might work...If it does, then they'll look like the brilliant general. But all these efforts also bank on the economy recovering and housing prices not falling too much further. Those are not safe assumptions."

P.S. I normally don't like to be the guy who says "I told you so", but for today I will. Back when the PPIP was first floated by the Treasury my diligent research in my Top Stock Insights advisory service spotted three stocks that would profit big time if the PPIP went through and profit modestly even if it did not. We did it. In a matter of weeks - not months or years - we profited on Legg Mason (NYSE:LM) for 8.16%, BlackRock (NYSE:BLK) for 9.1%, and AllianceBernstein (NYSE:AB) for 12.77%. Top Stock Insights readers booked these gains DESPITE the collapse of Geithner's PPIP plan. To find out how you can see steady and consistent gains no matter what happens, check out Top Stock Insights at http://www.topstockinsights.com/.

Leading today's rally in small cap stocks is FreeSeas, Inc. (Nasdaq:FREE), a Greek based operator in international dry bulk shipping, on news that Q1 earnings of $0.29 per share beat analysts estimates by $0.04 or $0.24 per share. The company attributes much of this to the upward pricing in the Dry Bulk Index. Further statements from the company indicate management's expectation to achieve profitability throughout 2009. Shares are up 26% through morning and early afternoon trading to $2.76.

Other small caps in the shipping sector posting gains today include Hornbeck Offshore Services (NYSE:HOS) up 5.6%, Diana Shipping (NYSE:DSX) up 5.75%, and Genco Shipping (NYSE:GNK) up 6.7% for the day.

(Note: for more information about profitable shipping plays check out my new report, "3 Value Play Shipping Stocks to Navigate to Calmer Waters". You can find it HERE.)

Other small caps over 20% today (as of 1:30 P.M. Eastern) are from the healthcare sector with Exelixis (Nasdaq:EXEL) posting a 21.9% gain on news of it development partnership with heavyweight drugmaker Sanofi-Aventis to work on a cancer drug. The deal is expected to be worth $140 million upfront and eventually up to $1 billion. The other health sector leader, and in third place today, is Dynacq Healthcare (Nasdaq:DYII) currently trading at $3.37 on today's gains of 21%.

As of 1:30 P.M. Eastern the DJIA is up 0.90% to 8,374.73, the Nasdaq trails it just slightly bringing in a gain of 0.82% at 1,745.20, and the S&P 500 leads both with a 1.25% gain for trading to bring it to 904.20.

*****Yesterday, it was reported that median home prices fell to $209,700 from $246,400 in April 2008. That's a steep year-over-year correction, even though prices were up from March 2009.

Today, we hear that that new home sales posted a gain, though not as big as expected.

The housing market is bottoming. How long will the bottoming process take? Common sense would say it will take a while, probably a couple years, to work off the inventory and get current delinquent loans back on track.

Persistently high unemployment rates will not help speed the recovery in housing. But at least we're seeing signs that the housing market is stabilizing. We should expect to see swings in the data, one good month could easily be followed by a bad month. It will be interesting to see how much the stock market moves on housing data going forward. I would suspect that only extreme readings would move stocks significantly.

*****The Mortgage Bankers Association reported that 9% of mortgages are delinquent. Throw in mortgage holders that are in foreclosure and it's 12%. That's a huge percentage. It's also the highest since data was tracked, starting in 1972.

It's easy to see why the numbers are so ugly - as the unemployment rate rises, fewer can afford their mortgages. And in some areas of the country the unemployed can't move to find a job because they can't sell their home. So it's no wonder that more and more economists expect a "double-dip" of recession.

74 percent of economists responding to a National Association for Business Economics survey believe the U.S. economy will grow in the 3rd Quarter. But the growth won't be strong or lasting.

A growing number of economists, including Dr. "Doom" Nouriel Roubini, believe it's likely that the U.S. economy will go back into recession in the second half of 2010, when government stimulus wears off.

*****The economic recovery is facing two major speed bumps - rising energy prices and rising interest rates. As the economy recovers, energy prices will rise, soaking up excess household funds and leaving less for discretionary spending. We've seen oil prices practically double so far this year and OPEC has announced that it feels that RIGHT NOW oil should be valued at $80 a barrel: meaning another 27% from today's $63. That's going to hurt at the pump even more. Here at the Washington, D.C. offices we're already up 40% since December with a regional average of about $2.39.

As the government continuer to sell Treasury bonds to fund the budget shortfall (over $1 trillion for 2009, and counting) and pay for stimulus initiatives, bond yields will rise, making it more expensive for consumers to get a loan. That will affect the market for big-ticket items like cars and new appliances, not to mention homes.

*****All this will have important consequences for your investments for the foreseeable future. First and foremost, it will be important to follow sector trends. Energy will remain strong, but sectors like retail, housing and consumer goods will probably remain volatile. There will be some quick, isolated opportunities here and there in those sectors, but the broader trend is not positive.

Also, risk management will be critical to success. Investors should have exit strategies in place for their investments. This is not a time to be thinking "buy and hold." Rather, if you have gains, don't be afraid to take the money and run.

*****Speaking of taking your money…just this morning I advised my Top Stock Insights advisory service members to take their 19% gains on BlackRock, Inc. (NYSE:BLK) today. BlackRock was my feature recommendation for profiting from the Treasury's Public-Private Investment Program (PPIP) to remove toxic assets from banks' balance sheet.

Several important aspects of the plan have been removed, and I suspect Treasury Secretary Geithner will abandon it altogether soon. The PPIP is simply not going to work, and for many of the reasons I've stated here in Daily Profit.

First and foremost, banks simply don't want to sell. And Geithner blew his opportunity to gain some leverage over the banks through his "stress tests." And all the bailout money didn't exactly convince banks they were in danger of failure and needed to sell.

At least Top Stock Insights readers managed to turn a profit on Geithner's failed plan. Now, we're setting our sights on India. The recent election there has set the stage for massive economic reform and jumpstart to growth.

Despite a huge jump for Indian stocks in the wake of the election results, not many investors are considering India right now. But I think that gives us a distinct advantage as India could be one of the great growth stories this year and going into the next several years. If you're interested, you can find out how to get my Special Report 3 India Stocks Set to Soar in 2009 by clicking HERE.

Acura Pharmaceuticals (Nasdaq:ACUR)
Palatine, Ill.
http://www.acurapharm.com

52-week low/high: $5.79/$27
Shares Outstanding: 42.72 million
Market Capitalization: $331 million

More than 75 million Americans suffer from pain — more than the number of people with diabetes, heart disease and cancer combined. Prescription medications exist; however, the abuse of such, especially by younger people, complicates physicians’ ability and/or willingness to treat pain. Enter Acura Pharmaceuticals (Nasdaq:ACUR), a company that specializes in prescription drug abuse deterrents. 

The company has seen broad-based institutional interest as of late. According to Nasdaq.com, seven new positions were initiated as of March 31, 2008 in Acura, while eight existing investors increased their positions. On the flip side, only one position was decreased and sold out. Those who initiated new positions as of March 31 were UBS (NYSE:UBS), Merrill Lynch (NYSE:MER), Black Rock (NYSE:BLK), Wells Fargo (NYSE:WFC) and Deutsche Bank (NYSE:DB).

The Palatine, Ill.-based firm specializes in development of opioid pain medicines using what it calls Aversion technology, which is a patented platform designed to develop pharmaceutical products that are intended to relieve moderate to severe pain and deter common methods of prescription drug abuse (injection, nasal snorting and intentional swallowing). Acura’s lead product candidate is acurox — orally administered release tablets with oxycodone to treat severe pain.

In fact, Acura in conjunction with pharmaceutical company King Pharmaceuticals (NYSE:KG) recently reported positive results for a phase III study on the acurox tablets and expects to submit a new drug application to the FDA for acurox tablets by year end.

Acura also has a license agreement with King to develop opioid analgesic products using the aversion technology (opioid is a chemical used in drugs for pain relief). The two are currently jointly developing three immediate-release opioid analgesics using the aversion technology.

The alliance with King, consummated in December 2007, has proven to be a sagacious move, as the company is already realizing revenue accretion. In 2008, Acura recognized $17.1 million in revenues, adding to a strong first quarter.

For the first three months ended March 31, 2008, the latest quarter for which results were available, the company reported net income of $7.4 million, or $0.15 per, compared with a net loss of $9.2 million, or $0.26 per share for the same quarter in 2007.

Drilling down further into the financials, the company has just closed in on profitability. Acura swung to a profit in the fourth quarter of 2007. The company began generating positive cash flows from operations in 2007 and has been steadily increasing its cash position. As of April 30, 2008, the company had cash and cash equivalents of approximately $30 million with no term indebtedness.

Gross margins are higher than the industry at 100%, while the industry sits at 69%. Operating margin was 39.17% compared with -19.84% for the industry.

After declining in morning trading, small-cap stocks began a rally around 10 a.m. ET, surging to more than 729. Better-than-expected earnings from several small-cap companies helped to act as a catalyst for the market rally. At 1:24 p.m. ET, the Russell 2000 (NYSE:IWM) was up 5.60, or 0.77%, at 729.95.

Despite the rally, several bearish indicators gave investors pause early in the session. Federal Reserve Chairman Ben Bernanke said late Monday that increasing home foreclosures might harm the economy. Adding to investors’ concerns was mortgage firm Fannie Mae’s (NYSE:FNM) reported a $2.2 billion loss on credit-associated costs, which enabled the company to post a wider-than-expected quarterly loss of $2.5 billion. Swiss banking giant UBS AG (NYSE:UBS) reported early Tuesday that it will cut 5,500 employees and sell $15 billion in risky debt to BlackRock, Inc. (NYSE:BLK) at 25% off its face value.

Among sectors, the big losers include airlines, water utilities, fabricated plastic and rubber materials producers and personal services firms. On the flip side, companies associated with oil and gas operations, coal, motion picture services, gold and silver were gaining ground.

Some of the firms that have broken out in Tuesday’s trading include China Finance Online Co. (Nasdaq:JRJC), which broke through $23 resistance and is now up about 9% at $23.94. After experiencing a sell-off at $56.75, vacuum and . . .