ECLIPSE SURGICAL TECHNOLOGIES (ESTI) 10 3/8 +1/16. Any trader worth his salt has CNBC
being beamed into the office. No, not for Maria B's early morning pep rallies or Mark Haines' CEO grilling
sessions. Joe Kernen is the reason for tuning into the home of Geraldo Live. There hasn't been a
hype-myster like Joe since Dan Dorfman, the king of the stock tout, was booted off the air. The only
difference is that half the time Joe forgets his own strength. For some reason, when this guy makes
comments on small-cap techs, particularly biotechs, the stocks have a tendency to take off. Of course,
these pops in price have nothing to do with fundamentals. As a result, the stocks always come back down,
with the downward momentum sometimes leading the stock below the level traded before he helped send
it into orbit. Previous examples: Geron Corp (GERN) and Nanophase (NANX). Assisted by Mr.
Kernen's comments, GERN shares ran from the low-teens to $17 in a matter of 1 1/2 days. The stock
now trades at only $11.75 a share, 32% off its high. In late-January, Nanophase shares were
single-handedly launched 60% to $15 by Mr. Kernen's rosy comments on the company's technology. Less
than three months later, the stock finds itself trading at a measly $6.15 a share, as a result of severe
profit-taking and earnings warning. (Before the warning, NANX's shares had given back 17% of their gain
in a matter of two weeks). Our experience tells us that Eclipse Surgical's outcome will be much the same,
following the stock's sharp run-up last week from $7 per share, on news of positive trial data, as well as a
little assistance from Mr. Kernen. Over the next 10-14 days, we would expect ESTI shares to slip back
to the $8.25 a share level, for a potential return of 21%. |
