Depomed (DEPO) up 29% on Trials

• Ian Wyatt
• On 5:00 pm EDT, Monday October 5, 2009

Once you start following the Top gainers list (called the Most Price % Change on Yahoo! Finance) you start to see trends from stocks that can be bought and held for gains.

Of course, there's always a caveat, and for the Top Gainers list, I have a perpetual one: biotech. Every day, there is a biotech up 17%, 20% 30% -- and every day I wonder two things: how could I have seen this coming; and what will the stock do next.

Today, we've got Depomed (NasdaqGM:DEPO - News), up 29% on positive news about trials of its pain medication for people with shingles. Cardium Therapeutics (AMEX:CXM - News), up 21% on no news, and AVI BioPharma (Nasdaq:AVII) up 20% on the award of an $11 million military contract for development of its Junin virus infection drug. (The government believes the Junin virus could possibly be used as a weapon of mass destruction.)

Of these stocks, Depomed seems to be the only one that might have been predictable. The company already has a diabetes and UTI drug on the market, and so one might have been following the company.

As an aside, I've watched AVI BioPharma run in the past on bird flu scares and even the swine flue. But the bottom line here is that AVI has a $165 million market cap and just $16 million in revenues. The price-to-book value of 65 makes me think the stock will probably not hold today's gains.

Because Depomed already has a couple drugs on the market, it could be a viable investment. But it will almost certainly dip in price in the near future. And Cardium? No. Just...no.

Ultimately, biotechs require too much work, and that includes guesswork. You can read the 10-Qs and Annual Reports, but you also must know science. Frankly, I prefer businesses where I can understand the business by understanding the numbers.

And I understand the numbers behind Maguire Properties (NYSE:MPG - News) 20% move today. The stock is trading at 20% of revenues and a fraction of asset value. The problem? It's underwater on some loans. Debt is high. But the government is intent on addressing the re-financing problems in the commercial real estate sector. And the Treasury is on the verge of approving some toxic asset funds set up by banks and private investors.

In other words, help may be on the way. And at such a discount, investors see Maguire as a good bet. I first mentioned Maguire in SmallCapInvestor Daily when it was around $1.30. It closed today at $2.26.

I am intrigued by Trident Microsystems (Nasdaq:TRID) 15% move up today. Trident makes integrated circuits for digital and LCD televisions. And it's saying that 1Q revenues will be up better than 24% over previous estimates. That's a big change, and it could be fundamentally significant for the company. I won't be surprised to see more upside here. 

Brocade Communications Systems (Nasdaq:BRCD) is a large cap company that made the Top Gainers list on reports that it wants to be bought out. Hewlett-Packard (NYSE:HP - News) is mentioned as possible suitor. Unfortunately, Brocade is losing money (though the last quarterly loss seems reversible), has a net $750 million debt to cash deficit and just ate up any premium investors might have gotten with today's 20% move higher. Oh well.

But if you like storage, I have a storage stock in the portfolio of my Top Stock Insights advisory service that's ripe for a buyout. It's a leader in its space, is profitable, and has $2.6 billion in cash as opposed to $1 billion in debt. And the CEO is saying that every company has its price.

In fairness to my subscribers, I can't reveal the name here. But you're welcome to check out Top Stock Insights HERE.

Finally, I want to remind you of the upcoming IPOs I listed on Friday. IPOs have been doing well, and you might be able to use these ticker symbols to your advantage:

Over the next 6 trading days, watch for IPOs from Verisk Analytics (proposed symbol VRSK, expected to debut at $21-$22 on October 6), Omeros Corp (proposed symbol OMER, expected to debut in the $10-$12 range on October 7), Mistras Group (proposed symbol MG, expected to debut in the $14-$16 range on October 7) and Chinese stock DST Digital Networks (proposed symbol ZSTN, expected to debut in the $7.50 to $8.50 range on October 12).

I'll check in and see how they do on their opening days.

Ian Wyatt is the founder of Business Financial Publishing and author of the book, "The Small-Cap Investor: Secrets to Winning Big with Small-Cap Stocks." You can learn more about his book at http://www.smallcapbook.com, read his blog at http://www.IanWyatt.com, and follow him on Twitter at @IanWyatt.

Buzz up!