Why Did My Stock Just Die?
|InterDigital (NAS: IDCC)||****||(14.2%)|
|Winner Medical Group (NAS: WWIN)||***||(12.1%)|
|American Public Education (NAS: APEI)||*****||(7.4%)|
The Dow jumped 125 points yesterday, or 1%. Not a bad recovery seeing how bleak things looked. Stocks that went down by even larger percentages are pretty big deals.
One deal for patents was enough to send wireless technology leader InterDigital soaring on suspicion its 8,000-strong portfolio would be valuable. Two such deals, not so much.
Google (NAS: GOOG) got beaten out for the patent portfolio of bankrupt telecom equipment maker Nortel by a consortium of companies, which put InterDigital's own patents in play as analysts figured the search giant wouldn't allow itself to lose again. InterDigital itself stoked the fires of speculation by saying it was searching out strategic alternatives to monetize the portfolio. While Qualcomm (NAS: QCOM) was another possible patent owner bandied about, Google went a completely different way and surprised everyone with its bid for Motorola Mobility.
Although InterDigital's shares fell, the premiums that buyers are willing to pay for wireless patents means the company's portfolio is still exceptionally valuable, and there will likely be more buyers stepping up. Although Google was a particularly deep-pocketed suitor, private equity also might find this a strategic area to enter.
With or without a deal, the CAPS community thinks InterDigital will succeed, as 96% of the 1,285 members rating the wireless specialist say it will outperform the broad market averages. You can tell us on the InterDigital CAPS page or in the comments section below if you agree.
Wait a cotton-pickin' minute
With cotton prices rising, the impact of resulting high costs usually centers on apparel makers like VF or True Religion. Yet even Chinese medical-care products makers are not immune, as Winner Medical investors found out when it reported earnings last week that fell short of analyst expectations.
Cotton prices ate away at margins for its surgical dressings and gauze pads, and though its signature PurCotton product, a nonwoven fabric made from 100% cotton, saw sales double in the quarter, gross margins for the company fell due to higher costs.
Cotton prices have since stepped back from their highs, but the Chinese government announced earlier this year that it was establishing a cotton reserve system and would pay farmers a premium to grow the crop. China's cotton acreage is estimated to grow just 5% this year, half the rate the government had predicted.
That may help down the road, but Winner will have to contend with elevated prices now, and the stock action yesterday was like a delayed reaction to the earnings news. In the meantime, CAPS All-Stars are willing to give the medical products maker the benefit of the doubt, with 86% of those registering an opinion saying it can still beat the indexes.
You can follow its progress by adding it to the Fool's free portfolio tracker and lick your wounds by adding your opinion to the Winner Medical CAPS page.
American Public Education is feeling the heat of the Obama administration's enmity toward for-profit, post-secondary education institutions.
Because the amount of money they can accept from federal Title IV programs is limited to 90% of their revenues, and since Defense Department tuition assistance isn't included in the total, for-profit colleges like Apollo Group (NAS: APOL) are actively seeking members of the military to enroll in their online courses. Apollo is even hiring military personnel to help recruit students.
But the administration has been trying to thwart the sector's advancement, with the typically nonpartisan GAO going so far as to publish a politically influenced report that made up misrepresentations about for-profit colleges. In what looks to me like a coordinated effort, the Department of Defense changed the rules on the schools' ability to accept assistance monies, such as requiring third-party reviews and accreditation by an Education Department-acceptable agency.
With the new rules scheduled to go into effect Jan. 1, an analyst said yesterday that he believed the Department of Defense may revise its requirements further. Since American Public Education receives more than half its revenues through the program, the market sold off its shares.
Yet American Public Education expects the number of its students qualifying for Department of Defense tuition assistance to shrink over time, because as for-profit schools seek out military students, it's going after more Title IV funds itself. The ultimate impact may be less than what's feared.
A few months ago, CAPS member colleran expected our troop deployments overseas to decrease, giving American Public Education a bigger pool of students to attract:
Given the number of soldiers coming home in the next few years, as well as the potential to expand into other areas of Internet education, I like the future of this company a lot. I especially like that it is one of the low cost providers. If they can keep their tuition low and expand to new areas, they could expand many times over,
Tell us on the American Public Education CAPS page whether you think it can still go to the head of the class.
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 The Motley Fool owns shares of Qualcomm, American Public Education, and Google. Motley Fool newsletter services have recommended buying shares of Google, Winner Medical Group, and InterDigital. 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 does not have a financial position in any of the stocks mentioned in the article. You can see his holdings here.
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