Although it's still too soon to bet the farm on it, November's market weakness looks like it's set up a decent Santa Claus rally.... but more for some stocks than other. Among the most ripe for a bounce are Crocs, Inc. (NASDAQ:CROX), Corcept Therapeutics Incorporated (NASDAQ:CORT), and Universal Display Corporation (NASDAQ:PANL). Here's why.
Sometimes a biotech stock is working on a breakthrough drug, and a certain FDA approval in the near future is sure to light a fire under the stock. Corcept Therapeutics Incorporated isn't even close to being that kind of story though. The most compelling thing about CORT right now is that it's rallying, and the shape (and acceleration) of the rally suggests more upside is on the way. The steep selloff in early November is fueling the bounce-back as well.
CORT is the developer of the appropriately-named Cortisol drug, which is a steroid hormone, but it's also got Korlym (for hyperglycemia) already on the market. Make no mistake though - it's the psychiatric drug business that has the market buzzing about Corcept Therapeutics now. There's no FDA-related news slated for the near future, but the fact that the stock is rising so firmly right now speaks volumes.
Following November's plunge from $32.07 to $23.12 in just two days, it would have been easy to give up on Universal Display Corporation. The company posted a surprising third quarter loss and cut its outlook, and PANL paid the price. As the old cliche goes though, it's always darkest before the dawn.
PANL makes OLED (organic light-emitting diode) materials and equipment... the kind of stuff used in more and more touchscreens. The advent of the tablet age has put this company as well as its peers at center-stage, but the OLED market is still young and volatile. The market may have simply expected too much from Universal Display Corporation last quarter. Here's the thing... the worst-case scenario may have still been more than priced in, meaning - given the current outlook - there's actually more upside for the stock. That's what today's chart is suggesting anyway, but that gap is still aching to be closed.
Finally, the last three months have been miserable for Crocs, Inc.; shares have fallen from a peak of $18.60 to a low of $12.00, as nothing seemed to quite work out in favor of the company. The news was never actually that bad (Q3 income was actually up 49%), but it never seems to love up to the market's expectation (revenue missed by 3%, but was still up 7.5%). Ergo, CROX got hit.
Given enough time though, the market catches its mistakes. CROX is trading at only 8.8 times trailing earnings and a very plausible forward-looking P/E of 8.7. The price/sales ratio is a mere 1.1.All are lower than average, and Crocs, Inc. continues to be an amazing turnaround story. The chart's starting to say the market agrees.