Why Did My Stock Just Die?
|VirnetX Holding (ASE: VHC)||*||(28.1%)|
|Radian Group (NYS: RDN)||**||(28.3%)|
|DG FastChannel (NAS: DGIT)||*****||(24.9%)|
Where to begin? Markets got crushed yesterday, with the Dow falling 635 points as fears about the loss of the U.S.'s AAA credit rating hit the market. Still, these stocks fell even more than that.
After bankrupt Nortel's patent portfolio got bid up to $4.5 billion by a consortium of companies that wanted the wireless network's patents, followed by InterDigital (NAS: IDCC) announcing it wanted to monetize its portfolio as well, lots of companies seem to want to see just what their patents are worth these days. Carl Icahn even suggested Motorola Mobility (NYS: MMI) ought to explore the opportunities contained within its portfolio.
There's little reason to wonder why VirnetX Holding's stock previously took off, rising by a third in just a few weeks time. It has a bevy of patents it's been trying to enforce.
Yet as quickly as it rose, VirnetX's stock has fallen even harder. The stock is down more than 50% from those highs. Yesterday's sell-off might suggest investors thought it would be hard to extract any cash from companies for the patents it held. Yet VirnetX announced it was awarded another patent today, its ninth this year. Yesterday's gloom may turn into tomorrow's sunshine.
Its got more court cases coming in November against several companies including Apple and Cisco. The judge for the case is the same one as it was for the Microsoft case (which Virnetx won). When you combine that with their security technology which is "essential" for 4g, looking forward VHC can only go up
Does VirnetX have a case? Let us know on the VirnetX Holding CAPS page or in the comments section below if you think there's still money to be made.
Time for another dip down?
Investors don't have to look too far to understand why Radian Group and Genworth Financial plummeted more than the market as a whole when the entire financial sector was getting razed. Insuring mortgages is a pretty risky business, especially if we're driving pell-mell into a double-dip recession.
In its recent quarterly conference call, Radian's CEO pointed out that while it experienced "momentum" in its loss mitigation efforts, loan modifications accounted for 21% of the "cures" it achieved in the second quarter, up from 17% in the first. A cure is when a loan returns to on-time payment status.
However, loan modifications have been shown not to work in the long run. A report earlier this year by S&P found 80% of the loans modified between 2007 and 2010 defaulted within two years of the modification.
As of this past quarter, they were operating with positive net income and continue to reduce their delinquent loans while improving their risk portfolio by ensuring that they loan to people with good FICO scores. All of this, yet the stock is trading below $3.
Add Radian Group to the Fool's free portfolio tracker to keep up to date on how delinquencies, modifications, and cures impact its results.
Could better advertising sell these shares?
Internet marketing and advertising provider DG FastChannel split the difference yesterday, beating analyst expectations on earnings but falling short on revenues. The willingness investors showed in dumping the shares may have surprised some analysts, but it likely had just as much to do with margin deterioration as anything.
Although revenues jumped almost 17% from the year-ago period, sales and marketing expenses increased at double that rate, slicing gross margins. High-definition revenues also jumped 30% over the year-ago period, but the rate of growth is down precipitously both year-over-year and sequentially. First-quarter HD revenues grew 64%; in last year's second quarter it nearly doubled. Such dramatic declines are a cause of concern.
It could be a result of rivals like Akamai (NAS: AKAM) and Limelight Networks (NAS: LLNW) pushing their own platforms and technologies to deliver HD content. CAPS members are decidedly more bullish on DG's prospects, with 97% of those who have rated it believing it will be able to overcome such obstacles. You can follow along on its development by adding it to your watchlist and let us know on the DG FastChannel CAPS page if you think it can change things in a hurry.
Ready for a resurrection
Just because your stock has taken a beating 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 Motley Fool newsletter services have recommended buying shares of InterDigital and formerly recommended Akamai.The Motley Fool owns shares of Microsoft and Apple. The Fool owns shares of and has created a bull call spread position on Cisco Systems. Motley Fool newsletter services have recommended buying shares of Microsoft, Apple, and Cisco Systems. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.Fool contributor Rich Duprey owns shares of Motorola Mobility but does not have a financial position in any of the other stocks mentioned in the article. You can see his holdings here.
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