Why Did My Stock Just Die?

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A better economic report and Europe stepping back from the financial abyss helped drive stocks higher yesterday, but your stock went and took a nosedive. Don't panic, though. First, let's see whether it had good reason to fall. Sometimes, panic-fueled drops can make excellent buying opportunities. Here's the latest crop of cratered stocks that could provide a possibility for profit:

Stock

CAPS Rating(out of 5)

Thursday's Change

Youku.com (NAS: YOKU) *(18.3%)
Focus Media (NAS: FMCN) ***(18.2%)
Satcon Technology (NAS: SATC) ***(12.3%)

With the Dow Jones Industrial Average (INDEX: ^DJI) jumping 148 points yesterday, or 1.3%, stocks that went down by even larger percentages are pretty big deals.

A brief pit stop
Facebook, YouTube, and Twitter are all blocked in China because the government fears its people. They don't want there to be a "Chinese spring" similar to what's happening in the Arab world, fueled largely by social-media outlets.

That's given rise to Chinese companies that are similar to those services, with Renren (NAS: RENN) resembling Facebook and Yoku.com being a YouTube-like service. SINA's (NAS: SINA) Weibo is akin to Twitter. Yet in a country where free expression is repressed, don't expect much individuality.

With the government at home keeping a tight grip and U.S. authorities launching a probe into the accounting practices of many U.S.-traded Chinese companies, the businesses are wound tightly. It was news yesterday that the Justice Department was joining the hunt for fraud that sent many of these companies plummeting. In addition to Youku, SINA was down 10% and Baidu (NAS: BIDU) was down 9%.

CAPS All-Star walt373 thinks Youku has problems beyond just control and fraud. He sees its business model as flawed: "So let me get this straight, these guys are trying to make people pay for videos in China? Good luck with that."

The unprofitable video company will still have free content, but it signed an agreement with Time Warner to begin streaming premium content, too. View what others are saying on the Youku.com CAPS page and follow its progress by adding the stock to your watchlist.

The devil's in the details
Chinese companies also have the added concern that the country's economy is beginning to lose steam. And if the economy is slowing, businesses will advertise less, which accounts for why digital-media specialist Focus Media fell as hard as it did.

Focus Media provides advertisers with hundreds of thousands of customized LCD displays, poster frames, and outdoor billboards in shopping malls, elevators, and hospitals across dozens of Chinese cities. It is one of the largest out-of-home advertisers, meaning it dominates the ad market that's also home to VisionChina Media and is designed to reach consumers when they're away from home.

With almost 1,100 CAPS members weighing in on the ad house, 96% believe it will go on to outperform the broad market averages. Its three-star rating means they have less concern that it's a fraud, in light of the accusations that brought down ChinaMedia Express.

Add Focus Media to your watchlist, and display your opinion on the Focus Media CAPS page.

A link with the past
There was no company-specific news to drive SatCon Technology's stock lower yesterday, though maybe after a very disappointing second-quarter report last month, investors were hoping for more than a 5 MW installation at a college campus, which is what it announced yesterday.

Both SatCon and Power-One (NAS: PWER) have failed to light up the market, and with revenues falling, guidance cut, and the outlook for the niche turning cloudier, a small project like this won't do much to convince investors that the tide is turning. But a project is a project, and it's better than nothing, which might explain why 94% of the CAPS members rating SatCon believe it will go on to beat the Street. All-Star members might be more sanguine, but the analysts tracking the inverter maker are unanimous that it can come out ahead of the indexes.

So add the stock to the Fool's free portfolio tracker if you think it still has a chance to power forward and turn in some electrifying numbers.

Ready for a resurrection
Just because your stock has taken a beating, that doesn't mean it's going to roll over and die. Markets are known for overreacting. A closer look on Motley Fool CAPS at what's happened to your stock can give you an edge over other investors who just react to the market's lead. You can decide for yourself whether it's ready to come back from the dead.

At the time this article was published Fool contributor Rich Duprey holds no position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Power-One. Motley Fool newsletter services have recommended buying shares of Baidu and SINA. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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