STOCK WATCH The Biggest Winners of 2006 The stocks with the largest returns for 2006 will surprise you. It proves that sometimes, basket cases do get over their illnesses -- or the market thinks they can. By Jeffrey R. Kosnett December 2006
If someone offered you free shares a year ago of Northwest Airlines, Delphi and Calpine or tickets for Powerball and Megamillions, chances are you would have taken a shot at one of the lotteries. I know I would have. All three of these one-time business titans entered 2006 operating under Chapter 11 bankruptcy protection and trading on the "pink sheets," which often serves as a hospice for shares of failing companies.
Depending on ailing General Motors, its former parent and largest customer, Delphi’s future seemed particularly bleak. So how did these three basket cases place in Morningstar's top five gainers list for 2006 among all stocks with a total market value of $250 million or more? And, for that matter, who are some other big winners?
These are not small gains, by the way. Northwest Airlines (symbol NWACQ.PK), which started the year at $0.54, soared 992% through December 12. Delphi DPHIQ.PK), which started at $0.30, rocketed 965%, while Calpine (CPNLQ.PK), which came into the year at $0.21, increased a relatively pedestrian 458%. Each is still a massive loser over the past few years, so the 2006 performance proves only that you can make fast money even on basket cases if the timing of your wager is right.
Northwest’s shares rebounded in the wake of US Airways’ amazing recovery and the improved fortunes for the airline industry. Delphi, which is up for sale, has made some progress in improving its operations and has trimmed GM business from 60% of sales to 45%. Moreover, GM itself is breathing a little easier. Calpine, a “merchant energy” company that builds speculative power plants around the world, is approaching break-even on operations after some enormous losses.
But does this mean that there’s still more moola on the table? It’s doubtful. Delphi is likely to be broken up, and the terms of its sale will determine if there’s any further payoff for the common stockholders. Northwest, like the airlines in general, is not out of the woods. Calpine’s balance sheet is a fright, with billions of dollars in negative shareholder net worth. The road back to prosperity will surely be arduous. You can argue that all of these stocks got oversold, but once a company is in Chapter 11, most professional investors don’t want to hold the shares for long. So the bottom for these kinds of stocks is unusually hard to find.
It would be a hopeful sign if you saw the bonds or stocks of any of these three names on the list of holdings of Third Avenue Value (TAVFX) fund or Third Avenue Small-Cap (TASCX) fund. Third Avenue wizard Martin Whitman has a nose for sniffing out value in companies that are reorganizing under bankruptcy protection. But lately Third Avenue has been buying strong companies, such as Toyota, not weak ones. So, it’s probably best to adhere to the conventional wisdom and stay from anything that’s in Chapter 11 unless you are willing to zero out your entire investment.
The year has also seen shares of some profitable companies zoom. The top supergainer is Force Protection (FRPT.OB), another pink sheeter but one that has applied to trade on the regular Nasdaq. This South Carolina firm makes blast-protected vehicles for the Marines that can withstand exploding roadside bombs. Needless to say, these are lifesavers in Iraq and Afghanistan. So this little company is now not-so-little. Its stock is up 1,600% in 2006, from $0.74 to more than $13.
That gives it a price-earnings ratio of more than 100 and a price-to-sales multiple of six, so it’s expensive, but is it so expensive that it cannot rise again? Not necessarily. Force Protection gets little attention from analysts or investment managers. The two-voter forecast of 58 cents a share in earnings for 2007 means little because this company depends on military orders and that depends, at least to some degree, on what happens next in Iraq. Many other small-company defense stocks are sputtering. Shares of this company smell like they’re one downbeat press release or quarterly report away from a gigantic profit-taking party.
We called Force Protection’s offices near Charleston to find out more but so far haven’t received a reply. Directors and executives have been busily selling shares of late, at around $8 and $9 a pop. Can’t say I blame them, but it sure is a sign of caution.
Biotech startups are crapshoots, but if you guess well, the payoff is big. Medivation (MDV), which is on the American Stock Exchange, went up from $2.53 in early 2006 to around $17 and sold a private placement of stock in December for $16.25 a share. This dilution doesn’t hurt much if you invested at $3, but at $17, you’ll need more good news. Medivation has drugs for Alzheimer’s and other illnesses in development. The stock flew after the release in September of favorable test results from patient trials in Russia. But the company’s lead drug candidate is still in phase two of the three-phase U.S. procedure for getting a drug approved, so the risk is great.
Then again, no stock goes up 500% in a year unless something is uncertain, funky or speculative. Morningstar finds that 156 stocks that now have a market value of $250 million or more have at least have doubled so far this year. I can’t say I picked any of them or own any, but who would have ever thought to bet on Calpine and Delphi in search of the investment equivalent of a Powerball jackpot?
-------------------- "Great Day for Up!"....Dr. Seuss
IP: Logged |
Biotech startups are crapshoots, but if you guess well, the payoff is big. Medivation (MDV), which is on the American Stock Exchange, went up from $2.53 in early 2006 to around $17 and sold a private placement of stock in December for $16.25 a share. This dilution doesn’t hurt much if you invested at $3, but at $17, you’ll need more good news.
-------------------- Don't envy the happiness of those who live in a fool's paradise.
IP: Logged |
posted
Still, it is exposure in a mainstream financial site. I think it must have helped some.
What do YOU think is causing this rally?
Could be the contract news. I told myself yesterday after that big decline that if it got back into the 14's I was going to take some profits, but I don't want to miss the after hours news!
Jo
-------------------- "Great Day for Up!"....Dr. Seuss
IP: Logged |
posted
I think it could just be the buy-in after a normal correction, believe or not. Shorts have taken their profits, and longs who sold are loading up for the next run. No bad news on the horizon.
-------------------- Stick with Repo's plan in '07 - FRPT/DKAM!
IP: Logged |
quote:Originally posted by MoneyMoneyMoney: Sweet my 17 dollar sell went off this morn while in class. I still hold 50 shares !!! Nice profits from 11.48 .
Its about time to buyback!!! RSI IMO won't fall through 50 as it had a hard time getting just below the 60. Aroon still showing downtrend so I picked up a 100 and will wait on the other 50 later this week to bring my total back to 200 shares. It may fall a little further but NOT much. I say EOD between 12.95 and 13.05.
U.S. Securities and Exchange Commission Division of Corporation Finance 100 F Street, N.E. Washington, D.C. 20549
Attn: Messeret Nega
Re:
Force Protection, Inc.
Registration Statement on Form S-3
File No. 333-136701
Dear Messeret Nega:
Pursuant to Rule 477(a) promulgated under the Securities Act of 1933, as amended (the “Securities Act”), Force Protection, Inc. (the “Registrant”) hereby respectfully requests that the Securities and Exchange Commission consent to the withdrawal of its Registration Statement on Form S-3 (File No. 333-136701) originally filed on August 17, 2006, together with all amendments and exhibits thereto (collectively, the “Registration Statement”).
The Registration Statement covered the resale of certain shares of the Registrant’s Common Stock by the Registrant’s stockholder. The Registration Statement has not been declared effective and no shares of Common Stock of the Registrant have been or will be resold pursuant to the Registration Statement.
The Registrant further requests that, pursuant to Rule 477(c), an order with the date of the granting of the withdrawal be included in the file for the aforementioned Registration Statement in the following manner: “Withdrawn upon the request of the Registrant, the Commission consenting thereto.”
Please forward copies of the order consenting to the withdrawal of the Registration Statement to the undersigned at 9801 Highway 78, Building No. 1, Ladson, SC 29456, and Amy Trombly, Esq., Trombly Business Law, 1320 Centre Street, Suite 202, Newton, MA 02459. If you have any questions regarding this request or need any additional information, please call Amy Trombly at (617) 243-0060.
Thank you for your assistance.
Very truly yours,
Force Protection, Inc.
/s/ Gordon McGilton
Gordon McGilton
Chief Executive Officer
-------------------- "Great Day for Up!"....Dr. Seuss
IP: Logged |
U.S. Securities and Exchange Commission Division of Corporation Finance 100 F Street, N.E. Washington, D.C. 20549
Attn: Messeret Nega
Re:
Force Protection, Inc.
Registration Statement on Form S-3
File No. 333-136701
Dear Messeret Nega:
Pursuant to Rule 477(a) promulgated under the Securities Act of 1933, as amended (the “Securities Act”), Force Protection, Inc. (the “Registrant”) hereby respectfully requests that the Securities and Exchange Commission consent to the withdrawal of its Registration Statement on Form S-3 (File No. 333-136701) originally filed on August 17, 2006, together with all amendments and exhibits thereto (collectively, the “Registration Statement”).
The Registration Statement covered the resale of certain shares of the Registrant’s Common Stock by the Registrant’s stockholder. The Registration Statement has not been declared effective and no shares of Common Stock of the Registrant have been or will be resold pursuant to the Registration Statement.
The Registrant further requests that, pursuant to Rule 477(c), an order with the date of the granting of the withdrawal be included in the file for the aforementioned Registration Statement in the following manner: “Withdrawn upon the request of the Registrant, the Commission consenting thereto.”
Please forward copies of the order consenting to the withdrawal of the Registration Statement to the undersigned at 9801 Highway 78, Building No. 1, Ladson, SC 29456, and Amy Trombly, Esq., Trombly Business Law, 1320 Centre Street, Suite 202, Newton, MA 02459. If you have any questions regarding this request or need any additional information, please call Amy Trombly at (617) 243-0060.
Thank you for your assistance.
Very truly yours,
Force Protection, Inc.
/s/ Gordon McGilton
Gordon McGilton
Chief Executive Officer
on 8/17 the company filed an S3 registration statement to sell/offer 1 million shares of common stock at a price of 6.26, this statement is cancelling that proposed sale.
IP: Logged |
posted
That filing could cause a temporary drop in PPS due to new holders not understanding that this is all housekeeping necessary to clean up before the NASDAQ listing.
In the long run, this is a good thing.
Jo
-------------------- "Great Day for Up!"....Dr. Seuss
IP: Logged |
UBBFriend: Email this page to someone!
Printer-friendly view of this topic
![[Big Grin]](biggrin.gif)
![[Smile]](smile.gif)
!!! Nice profits from 11.48 ![[Wink]](wink.gif)
. 
