Why Did My Stock Just Die?
Well, it could have been a lot worse as the markets rebounded from the worst of their fall, but your stock went and took an even bigger 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:
CAPS Rating(out of 5)
|AsiaInfo-Linkage (NAS: ASIA)|
|JinkoSolar (NYS: JKS)|
|Momenta Pharmaceuticals (NAS: MNTA)|
With the Dow Jones Industrial Average (INDEX: ^DJI) falling 108 points yesterday, or 1%, stocks that went down even more are pretty big deals.
Hanging up on growth
China's largest telecom IT software vendor, AsiaInfo-Linkage, has been operating on something of a knife's edge all year long. Pointing to rumors of fraud against it earlier this year that never panned out, w6459 was concerned that short sellers would be soon mounting an attack against it: "A huge short interest has built up in this stock in recent months after fraud rumors circulated in the spring. Latest quarter had no big upside surprise so maybe the shorts continue to pile in."
It has a large presence in China, with half the market in customer-relations management, but it's heavily reliant on China Mobile (NYS: CHL) for 61% of its revenues, though it has relations with all three of China's top telecoms. Thus, when analysts at Susquehanna downgraded the stock yesterday, the shares dropped sharply.
Yet they could have taken some comfort in the findings of Wedbush Morgan, which just last month found shares trading at just 7 times next year's earnings, looking like a nice discount. Now that they're trading below 6 times those earnings, and consensus estimates put EPS growth at 10%, so they should find shares even more appealing. But even in maintaining its outperform rating, Wedbush had pulled in its more exuberant target price of $27 a share down to $18 each.
Still, 91% of the nearly 330 CAPS members rating the IT specialist think it will outperform the broad market averages. Tell us on the AsiaInfo-Linkage CAPS page where you see it managing its growth from here.
Don't let the sun go down
Despite the failure of politically connected solar shop Solyndra, we've been led to believe that solar power, along with wind and other renewable-energy sources, were "green" industries, good for the environment. Have we been sold a bill of goods on that front as well?
JinkoSolar shut down one of its plants after regulators found the Chinese solar company may have been polluting a river from improperly stored fluoride.
Then again, as the Fool's Travis Hoium points out, "If you needed another reason to stick with U.S. solar manufacturers, who hypothetically operate more stringent facilities, now would be a good time to consider them over Chinese manufacturers." He offers up First Solar (NAS: FSLR) and SunPower (NAS: SPWRA) as two that offer lower risk profiles. Importantly, First Solar may be able to surpass its Chinese rivals by incorporating record levels of efficiency into its thin-film panels and competitively go up against fossil fuels without government subsidies.
With 40% of CAPS All-Star members betting against Jinko, it seems they had worries beyond just pollution that would hold the solar shop back. You can add your opinion on the JinkoSolar CAPS page and let us know when you think the sun will shine again.
A bloody nose
Having just spent five days in the hospital over potential cardiac concerns, I'm intimately familiar with Sanofi's blood thinner Lovenox, a daily shot given right in your stomach. But yesterday, Amphastar Pharmaceuticals was reportedly given approval to market a generic substitute, which gave shares of rival Momenta Pharmaceuticals a shot in the solar plexus.
Momenta, together with partner Novartis, already markets an exclusive generic version of Lovenox in the U.S. for which Momenta earned more than $83 million last quarter. Right now, Momenta earns 45% of the profits on the generic's sale; if a third party (such as Amphastar) enters the market, those royalty percentages drop to the low double digits.
That's why the market reacted so negatively to the news, as the drug represents most of Momenta's revenue currently. But it also explains why Momenta has previously sued Teva Pharmaceuticals (NAS: TEVA) for trying to bring a generic to market. As Brian Orelli suggests, suing Amphastar may be Momenta's only recourse at this point.
Almost 95% of the CAPS members rating Momenta liked its long-term prospects. Let us know in the comments section below or on the Momenta Pharmaceuticals CAPS page whether you think this was just an overreaction.
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 Teva Pharmaceutical, China Mobile, Momenta Pharmaceuticals, and First Solar. Motley Fool newsletter services have recommended buying shares of China Mobile, Novartis, Momenta Pharmaceuticals, First Solar, and Teva Pharmaceutical. 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.
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