You saw the headlines. You know your stock price made a big move. But what does that portend for your investment's future?
By pairing the latest news with the collective wisdom of our 180,000-strong Motley Fool CAPS investing community, we might be able to discover whether your stock's latest exploits are a short-term hiccup -- or the start of a much bigger trend.
These two stocks both made big moves recently, one up, one down:
CAPS Rating (out of 5)
Change April 12 to April 19
|YPF (NYS: YPF)||***||(37.1%)|
|Human Genome Sciences (NAS: HGSI)||**||91.2%|
Source: Motley Fool CAPS.
Cry for me, Argentina
It wasn't enough that Argentinean President Cristina Kirchner created an international row by seizing the assets of Spanish oil giant YPF, but now she's gone and seized YPF Gas as well, taking 51% of its shares.
The two aren't the same company, but both are controlled by Spain's Repsol. The gas company provides fuel tanks to low-income households in Argentina. Kirchner has criticized YPF, the oil company, for not giving the country enough of its output while exporting it to other countries. Of course, she ignores her own economic policies that penalize businesses there, such as high taxes, price controls, and capricious rule changes, such as suspending tax breaks on production spending.
I noted the other day that it's not just foreign entities she's railing against but local corporations as well, such as Telecom Argentina (NYS: TEO) , which was pressured into suspending its dividend. Kirchner is seeking to stop the exodus of capital from the country, which is fleeing at an alarming rate as her nationalistic policies make it unwise to do business there. By taking over companies, however, she'll only exacerbate the flight, and anyone who puts his or her money at risk by investing in Argentina will likely see what happens to fools and their money.
While YPF's stock is expected to continue trading even though the government owns the stock, it's said Argentina will determine what the price will be. To remain invested in this company when such uncertainty exists -- or in any private business with significant assets in Argentina -- is to be looking for capital destruction.
I previously rated YPF to underperform when Kirchner only threatened it with a takeover because I had little doubt she would. I don't intend to change my rating anytime soon. Tell us in the comments section below or on the YPF CAPS page if you think international outrage will convince her to change her mind, then add the stock to your watchlist to see the drama unfold.
Who wants more?
There was another takeover threat that affected Human Genome Sciences, but it was a hostile takeover offer by GlaxoSmithKline (NYS: GSK) that led the biotech to soar in value.
There was an oft-occurring rumor that Glaxo wanted to buy it for $25 a share, particularly after the two got Benlysta approved, the first time in 50 years a treatment for lupus was given the green light. And considering the results HGS has generated thus far, it's not unsurprising its partner wanted more. Human Genome Sciences reported revenues more than doubled year over year, to $45.5 million, with Benlysta alone contributing almost $26 million.
But HGS rejected the offer because of the paltry sum Glaxo was willing to pay. It wasn't anywhere near the rumored $25 a share, but rather just $13 a stub, or $2.6 billion. I'd have been offended, too. Yet Benlysta's sales, for all their contribution to better results for HGS, have been underwhelming, running at about $11 million a month. Analysts, however, expect it will eventually turn into a billion-dollar blockbuster for HGS -- or whoever owns it.
While the offer was 80% above the current shareprice and the current bid range of $14.40 per share is over 100% higher, the offer is still only half of Human Genome Sciences 52 week high. The losses the last two quarters have depressed the share price into what was probably a bargain territory and GlaxoSmith[K]line's offer pretty much aserts that they feel the same.
Add Human Genome Sciences to the Fool's free portfolio tracker and let us know in the comments section below whether you think the biotech ought to reconsider its rejection of the bid.
Read all about it!
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At the time this article was published Fool contributor Rich Duprey holds no position in any company mentioned. Click here to see his holdings and a short bio. Motley Fool newsletter services have recommended buying shares of GlaxoSmithKline and ExxonMobil. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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