Top Buy and Sell Ideas Based on Big Movers From Last Week

The ugly budget fight and the fallout from the lack of a meaningful debt reduction plan once again took a heavy toll on the markets last week. The Research SPDR was down 5.7% last week, on the back of a 3.4% drop the prior week. Of the roughly 200 stocks in the innovation services group, ten stocks trading above $1 at closing on Friday, August 5, went down more than 15% while the week and another three went up more than 15% while the week. The fall in the research index mirrored the overall weakness in the broader markets as the indices plunged 7%-8% last week on the back of a 4% dive the prior week.

As an investor, it is imperative to keep a cool head, especially in such turbulent times, and keep scouting for new opportunities during keeping an eye on both the price movements and news flow. Our daily and weekly coverage analyzing the top movers for top buy and sell ideas is aimed at enabling you in that effort. You can access the rest of our daily, weekly and quarterly mover series from our author page. This article covers our analysis of the top movers in the research services group last week. Of the thirteen stocks that moved more than 15% up or down last week, we analyzed them to determine if they would continue in the same direction, or if they would reverse their moves going forward. The following are the best buy and sell ideas based on that analysis.

Vonage Holdings Corp.: VG provides broadband VoIP (Voice over Internet Protocol) services to over 2.4 million residential and small business clients in the U.S., Canada and U.K. Its shares plunged 22.9% last week, and they are up 37.9% YTD. The shares dropped last week afterwards the company’s announcement of its June quarter results on Wednesday morning earlier the market-open. VG reported revenues at 10cents, 1cent ahead of estimates, and revenue a bit shy of estimates at $218 million versus $220.6 million. But, total subscriber lines at the end of the June quarter fell both sequentially versus the March 2011 quarter as so then as year-over-year. At Friday’s closing price of $3.09, VG nevertheless trades at 7-8 forward P/E, during earnings are projected to flatten out going forward in the 8cents-10cents per quarter range. We believe VG is fairly priced here, and it should be range-bound between $2.5 and $4 in the nearly-term.

VirnetX Holding Corp.: VHC is a developer of software and innovation solutions for secure real-time communications over the Internet, just as instant messaging and VoIP. Its shares skidded down 27.1% last week on top of a 14.7% drop the prior week. There has been no company-specific news triggering the steep fall in the last two weeks, however shares were trading at a premium and were up nearly 700% in the last twelve months to a high in the $40s just prior to the fall. Currently, the shares are approaching their 200-day moving average in the $20 range, and in the absence of no fundamental drivers to the sell-off, it is very likely that shares will hold that level.

Buy MetroPCS Communications Inc.: PCS is a wireless telecommunications carrier, offering wireless broadband mobile services in the United States. A key distinguishing feature of the company versus other providers of cell phone services is that it does not require an annual contract, unlike similar service from AT&T, Sprint Nextel Corp., and Verizon Communications. We issued a buy on Wednesday on PCS, and continue to believe that the plunge in the stock price in the early part of the week was an over-reaction to the June quarter revenues miss.

Buy Clearwire Corp.: CLWR provides wireless broadband networks for delivery of residential and mobile internet access and voice services. CLWR clients connect to the Internet using licensed spectrum, along these lines eliminating the confines of traditional cable or phone lines. The company offers its service in fifty U.S. markets, we so then as in Europe. The stock fell 17.1% last week, on top of a 28.4% drop the prior week, and it currently trades nearly all-time lows, down 65% YTD and nearly 95% below its all-time high of $35 in 2007. We reiterate our buy from our prior coverage of CLWR last week, based on our belief that by embracing LTE (Long Term Evolution, latest standard in the mobile network technology) innovation for its 4G implementation, CLWR has now taken up some insurance against its own irrelevancy as its future is no longer tied completely to WiMax, a technology in other words in danger of becoming obsolete. Moreover, CLWR has spectrum assets that could fetch as much as $20 billion in an auction if the Obama administration frees up more spectrum for commercial use.