Why Did My Stock Just Die?
And down we go again as the markets turned tail once again and fell. 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.
CAPS Rating(out of 5)
|Home Inns & Hotels Management (NAS: HMIN)||**||(15.4%)|
|Glu Mobile (NAS: GLUU)||**||(14.8%)|
|RealD (NYS: RLD)||*||(14.7%)|
With the Dow Jones Industrial Average (INDEX: ^DJI) tumbling 179 points yesterday, or 1.6%, stocks that went down by even larger percentages are pretty big deals.
Not leaving the light on for you?
Is there something amiss in the acquisition of Motel 168 by Home Inns & Hotels Management? The Chinese hotel-chain operator plummeted 15% on no discernable news, but the acquisition of its peer is scheduled to close by the end of the month. It received antitrust approval at the start of September and lined up six senior lenders to finance a $250 million acquisition loan, so there shouldn't be a problem.
More than likely it may just be something more broad-based, as Chinese discount hotel chain 7 Days Holding Groupalso tumbled yesterday, down 15%, and China Lodging Group was down more than 8% as well.
The investment thesis in any of these plays was a bet on the growing Chinese middle class and their willingness to travel. For that reason, many investors also turned to Ctrip.com (NAS: CTRP) as a potential winner from rising wages in the country and their ability to spend more. Yet Home Inns has been trading down for most of the year and is down by almost half from its 52-week highs. Although there are fears of a Chinese economic slowdown, at an expected 9.5% growth rate this year, China would have to have a particularly hard landing to stop growing entirely.
Although 87% of the CAPS members rating the hotelier think it will outperform the market indexes, the low two-star rating they've assigned to it suggests they believe there are better places for your money.
Check in at the Home Inns & Hotel Management CAPS page to share your perspective, and then follow its progress by adding the stock to your watchlist.
Losing its stick
Mobile-gaming specialist Glu Mobile also dropped on no apparent news yesterday, though it was reported that a widely respected director who was responsible for recruiting independent developers for external development quit the company for a competitor, OpenFeint.
Glu has been generating huge interest by adding venues for its gaming output, and while the big news earlier this year was its partnership with NVIDIA (NAS: NVDA) , the real catalyst for growth is that its mobile games are more engaging than a lot of what's out there. Contract Killer should hold a lot more interest than milking a cow does on Zynga's Farmville.
There's also the hope that someone might come along and buy out the company, too. After Electronic Arts bought PopCap Games, speculation was that someone might be interested in Glu, too. But the Fool's Rich Smith points out, PopCap -- and even Zynga -- are profitable companies, while Glu will be turning in yet another year of losses in 2011.
For all that, CAPS member ColoredInvestor believes its growing portfolio will make Glu a winning investment: "This is a mobile gaming company focusing on content and ads, this is a great plan of action as smartphones become the premier communication device. They have a stellar list of titles, with a few flops, but they are pressing forward."
It might be worth playing along by adding Glu to your watchlist and letting us know on the Glu Mobile CAPS page whether you think it will be a killer addition to your portfolio.
Sony made an eye-popping announcement when it said it wasn't going to pay for 3-D glasses at movie theaters anymore, which sent shares of 3-D glasses maker RealD careening lower. Since glasses comprised 40% of its revenues in its most recent quarter, it could be a big blow to the 3-D technology leader.
Ever since Disney made the compromise to pay for 3-D glasses in theaters as a means of ensuring that theaters would convert to 3-D, studios have been paying for them. Depending on the movie and its distribution, glasses can cost a studio anywhere from $1.5 million to $10 million or more. Sony said that beginning next May, it will be stopping the practice.
For its part, RealD says it doesn't care who pays for the glasses and likens it to buying headphones when you get on a plane. But that doesn't fly with theater owners, who say it's ludicrous to be putting additional costs on moviegoers in a recession, particularly when the 3-D movie business is already seeing waning interest. Theater operator Regal Entertainment says that if Sony follows through on its threat, it may have to stop showing as many Sony pictures.
A possible winner in this could be sound specialist Dolby Labs (NYS: DLB) , which is also a significant player in the digital cinema and 3-D movie business but sells its glasses as part of a bundle that includes cinema systems and 3-D capability packages. Theaters already own the glasses Dolby sells.
But anything that makes it more expensive for consumers to go to the movies can't be good for the health of the industry. With only 42% of the CAPS All-Stars rating RealD to outperform the market, its apparent that they didn't think the 3-D specialist was healthy to begin with. Add the stock to the Fool's free portfolio tracker if you think we won't see its name up in lights for much longer.
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 owns shares of Dolby Laboratories, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Ctrip.com. Motley Fool newsletter services have recommended buying shares of Walt Disney, Ctrip.com, Dolby Labs, and NVIDIA, as well as writing puts in NVIDIA. 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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