When you see close to a 10% drop in the broad market, you just automatically assume it punishes the speculative names even worse. Being Hi-Beta has a price. That wasn’t any different in the last mini-tank. Many of these companies essentially have not had any real official change to their underlying stories. But we all know that the ‘story’ is dependent upon good times lasting for many quarters or longer.
This last drop has been extremely tough on many of these speculative and ‘cult stocks’ over the last couple of weeks. Here are a just a few of the instances in some of the more cult stock names we cover from time to time:
CMGI Inc. (NASDAQ:CMGI) is actually less than 10% above its 52-week lows of $1.20 now. At $1.36 it is down almost 50% from the $2.60 highs. This was a major cult stock for the first half of the year. If the capital markets are closing it may crimp its wave of investing into recent alternative energy companies. That argument seems flawed, and the ModusLink story has still been receiving coverage. Here was what we The story didn’t seem like it has changed at all, but it is obviously not at all immune to a market tank nor to a softening economy and any tightening liquidity crunch isn’t going to be well received by CMGI speculators.
Safeguard Scientifics (NYSE:SFE) traded as high as $3.28 at the end of April, and shares sit at $2.00 mid-day. Safeguard traded up after such a large move earlier this year at CMGI. We interviewed the CEO at the end of June. Maybe their own capital hasn’t dried up for investing, but partners may have a harder time pulling the trigger now.
Local.com (NASDAQ:LOCM) also saw shares skyrocket on a patent award and on other business developments, but even on the 2+% post-earnings gain today shares have fallen more than 50% from highs in July.
Hoku Scientific Inc. (NASDAQ:HOKU) is still up nearly 300% from lows, but it has been shares in recent weeks fall from highs of over $14.00 down to just under $8.00 today. Its pending contracts have been viewed with less certainty over the future financing of its polysilicon factory under plans in Idaho. That is the logic behind the slide any way. We gave a "both sides of the coin" picture on this back in June, and right now it’s on tails.
Odyssey Marine (NASDAQ:OMEX), formerly OMR on AMEX, shares are higher after it filed amended complaints against Spain after Spain wants its treasure back for free that it lost in shipwrecks and after a recent brief company boat seizure and data copied from one of the laptops on board. This was the story that got Odyssey back on the map, no pun intended.
Obviously there are many names out there that have been given a hard market slap. A 7% drop in the DJIA has equated to a 7% drop in the NASDAQ. All eyes are on the FOMC today, although with a liquidity and a housing market at serious risk Bernanke & Co. probably have more on their mind besides small cap speculative stocks.
In really tough times that won’t have major buyouts and times where investors may not be able to count on share buyback plans to add a floor, investors look at defensive stocks. Here was our revised ‘bulletproof stock list’ from last week. Just keep in mind that if a market stays tough, even the teflon stocks fall victime to the firing squad.
Jon C. Ogg
August 7, 2007
Jon Ogg can be reached at firstname.lastname@example.org; he does not own securities in the companies he covers.