Investing

Russell Rebalance Included Many Cult Stocks (CBOU, DDRX, OPWV, STEM, UBET)

There are some interesting cult stocks which have recovered so much that they are being added into the Russell 3000 Index when the index gets rebalanced and reconstituted at the end of this month.  Some of these are new entirely and some of these have been booted off of the Russell 3000 Index before.  We have given some  detailed color and insight on the following cult stocks: Carribou Coffee Company (NASDAQ: CBOU), Diedrich Coffee Inc. (NASDAQ: DDRX), Openwave Systems Inc. (NASDAQ: OPWV), StemCells Inc. (NASDAQ: STEM), and Youbet.com Inc. (UBET).

The coffee stocks have rallied so much that we now have CARIBOU COFFEE COMPANY (NASDAQ: CBOU) heading into the Russell 3000 Index in the “Consumer Staples” sector.  Its market cap is on the cusp as it is a mere $108 million, but this one also has risen over 400% from lows.  At $5.62 today, its 52-week week range is $1.10 to $7.48.

DIEDRICH COFFEE INC. (NASDAQ: DDRX) is the other coffee stock, although it is a roaster, and it is being added into the Russell 3000 under the “Consumer Staples” sector.  At $18.40 its market cap is only $100.6 million.  Be advised that this has been the top performer of all stocks we track for 2009.  If you bought 1,000 shares between November 2008 to March 2009, you would have paid $300 or less.  But after the run-up, this $300 investment would be worth more than $18,000 today.

OPENWAVE SYSTEMS INC. (NASDAQ: OPWV) is being re-added back into the Russell 300 as a “Technology” sector stock.  This cult stock should have probably ended up owning the space for digital content and digital actions in the mobile space.  Instead it became the wireless and technology version of the Boulevard of Broken Dreams.  As the carriers consolidated it killed the company’s business growth.  Amazingly, this one is up more than 400% from its lows and at $2.37 its market cap is back to $197 million and the 52-week range is $0.45 to $2.43.  There are many many holders who owned this up at $8.00 and higher.

STEMCELLS INC. (NASDAQ: STEM) is being added into the Russell 300 in the “Health Care” sector.  This one now gets to join another stem cell stock in the index. This stock is $1.62 and its 52-week range is $0.66 to $3.07 and its market cap is now $167 million.

YOUBET.COM INC (NASDAQ: UBET) is being added to the Russell 3000 in the Consumer Discretionary sector.  This stock has made a substantial comeback from lows (400%) and is very close to a yearly high.  This one has traded higher over the last week in anticipation of the addition and its market cap is now $132 million.

Again, there are two more opportunities as the other Russell index changes will be amended today and again next Friday.  It is always possible that some of these will change.

Jon C. Ogg
June 19, 2009