The Wall Street Journal-20080212-Possis Soars 35- on Deal- LCA-Vision Tumbles 18-

Return to: The_Wall_Street_Journal-20080212

Possis Soars 35% on Deal; LCA-Vision Tumbles 18%

Full Text (620  words)

Materials and energy companies, lifted by rising oil prices, drove small-capitalization stocks slightly higher, outweighing a return to drudgery for the financial sector.

"Retailers and financials are pricing in a severe recession, while materials and industrials are pricing in robust economic growth. So, someone's wrong," said Eric Cinnamond, mutual-fund manager for the Intrepid Capital Small Cap Fund.

Driving up shares of energy companies was a surge in prices of crude-oil futures. World Fuel Services rose $1.52, or 5.7%, to $28.25, on the New York Stock Exchange, while Superior Well Services increased 60 cents, or 2.8%, to 22.43.

Materials companies also moved higher, which Mr. Cinnamond partly attributed to their strength globally as the economy continues to be beset by consumer-spending concerns. Moving upward were Brush Engineered Materials (NYSE), gaining 2.19, or 8.8%, to 27.18, and Penford, rising 1.20, or 5.4%, to 23.45.

The Russell 2000 index of small-capitalization stocks rose 0.82 point, or 0.1%, to 699.75.

The Standard & Poor's SmallCap 600 increased 0.91, or 0.3%, to 369.93.

Following news that large-cap American International Group lost $4.88 billion in gross market value in October and November, several small-cap financials declined. Leading the downdraft were insurance and risk-management intermediary Hilb Rogal & Hobbs, off 3.31, or 9.2%, to 32.54, and bank-holding company FirstFed Financial, down 2.87, or 7.8%, to 33.88, both on the NYSE.

The selloff for financials followed some strength for small-cap banks during the last month. Despite continued concerns about the subprime crisis and potential lending issues, the KBW Regional Banking Index has risen 15% during the last three weeks.

"Some of these banks were getting close to book value, if not a discount, so there was a floor from a valuation standpoint," said Mr. Cinnamond, who notes it may be easier to evaluate smaller banks than their larger counterparts based on a more transparent balance sheet.

Merger-related information helped push a few small caps upward. Hypercom rose 1.17, or 30%, to 5.12, on the NYSE, after the Phoenix electronic-payment products provider said it opened discussions with Ingenico, following Ingenico's unsolicited $332 million offer for the company.

Large-cap Bayer agreed to buy Minneapolis medical-device maker Possis Medical for $361 million, or $19.50 a share. Shares of Possis ended trading up 5.01, or 35%, at 19.36.

Axcelis Technologies jumped 94 cents, or 23%, to 4.98. The Beverly, Mass., ion-implementation equipment company confirmed that Sumitomo Heavy Industries made an unsolicited offer to acquire Axcelis for $5.20 a share. Axcelis said its board is discussing the proposal, and that shareholders don't have to take action.

Centene slid 2.25, or 11%, to 19.17, on the NYSE, after the St. Louis managed-care provider said fourth-quarter earnings fell to $1.5 million from $13.8 million a year ago. Wachovia and Credit Suisse cut their ratings on the company.

Also reflecting a ratings change, First BanCorp, of Puerto Rico, (NYSE) tacked on 1.12, or 12%, to 10.34. Raymond James raised its rating on the Puerto Rican bank to strong buy from outperform, citing credit quality stabilization and net interest margin expansion in the company's recent fourth-quarter earnings report.

LCA-Vision fell 3.03, or 18%, to 14.20, after the Cincinnati laser- vision correction-services provider posted a 26% fourth-quarter earnings decline and cut 16% of its U.S. work force.

SulphCo increased 84 cents, or 20%, to 4.97, after the Houston oil- technology developer signed a distribution agreement with an Indonesian oil and gas services company and received an order through the same company.

Taser International climbed 69 cents, or 6%, to 11.65, after the Scottsdale, Ariz., stun-gun maker received an order from the interior ministry of a foreign country to equip law-enforcement officers with 3,000 Advanced Taser M26 electronic-control devices and related accessories.

---

Gregory Meyer contributed to this report.