Why Did My Stock Just Fall Apart?
Even though it could cost European taxpayers upwards of $1 trillion, hope for greater financial stability in Europe again drove U.S. markets higher Monday. Although your stock took a nosedive, don't panic. 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)
|SXC Health Solutions (NAS: SXCI)||****||(23.1%)|
|EasyLink Services (NAS: ESIC)||***||(9.2%)|
|Aviat Networks (NAS: AVNW)||***||(7.6%)|
With the Dow Jones Industrial Average (NYSE: ^DJI) jumping 105 points yesterday, or almost 1%, stocks that fell by substantial percentages are pretty big deals.
Still looking healthy
Investors in Canadian health insurer SXC Health Solutions panicked when Cigna agreed to buy HealthSpring (NYS: HS) for $3.8 billion, because the latter was SXC's biggest customer for pharmacy benefit management services. But it seems the fears might be overblown, and the loss of one-fifth of its market cap as a result of the sell-off makes SXC an attractive investment.
First, analysts point out that Cigna can't change the contracts SXC has in place with HealthSpring until 2015, or some four years from now. Second, while Cigna uses Argus for its PBM services, it's possible SXC could bid for HealthSpring's business. HealthSpring used to use Argus before switching to SXC, with a small possibility of SXC actually acquiring Cigna's PBM business.
Even if SXC lost HealthSpring's business, it would only amount to $30 million in operating income, according to analysts at Jefferies. That's more than a quarter of SXC's operating income over the past year, so it's nothing to sneeze at, but SXC isn't withering and dying either. There are plenty of alternative outcomes the market isn't considering.
With 97% of the 101 CAPS All-Star members rating SXC to outperform the market, they'll want to consider the long-term impact of the announcement. You can tell us on the SXC Health Solutions CAPS page or in the comments section below if you think it is all doom and gloom, and then see whether it can turn this story on its head by adding it to the Fool's portfolio tracker.
Staying on message
According to the market researchers at Unwired Insight, global SMS traffic reached 4.7 trillion messages in 2010 and expects it to reach 8 trillion messages by 2014. ZDNet says Twitter alone processes 4 billion SMS messages every month, and most users would never realize that TeleCommunication Systems (NAS: TSYS) was one of the companies behind text-message technology.
So you might want to think of EasyLink Services as trying to accomplish a similar feat for document transmissions with its supply chain and on-demand business messaging services. Through email, fax, and telex, EasyLink provides services to 30,000 accounts.
But it is being sued for patent infringement by J2 Global (NAS: JCOM) . J2 alleged that EasyLink and an Open Text (NAS: OTEX) subsidiary violate patents that allow users to send messages via email that can be received by fax. A Markman hearing ruling yesterday sided with J2, and the case is scheduled to be heard in January. A Markman hearing is used to iron out interpretations of certain patent claims before an actual trial begins.
EasyLink is flying under the radar of Wall Street right now, and much of Main Street for that matter, but of the three score CAPS members who have weighed in on the telecom services providers, 94% think it will beat the market indexes.
Add EasyLink to your watchlist and let us know in the comments section below whether you think it will get the message.
A wireless disconnect
Wireless network solutions provider Aviat Networks slid yesterday after analysts at Brigantine downgraded the stock from a buy to hold, which follows a cut in the price target they made back in August.
Aviat handily beat analyst expectations last quarter, posting profits of $0.05 a share compared to forecasts of just $0.03. Wall Street's now forecasting a loss of $0.03 for the current quarter, but it represents a big improvement over the $0.26 per share it lost last year.
Like CenturyLink (NYS: CTL) and Frontier Communications (NYS: FTR) , Aviat assists in bringing broadband services to rural areas. It recently signed an agreement with West Virginia to expand the state's existing microwave network to reach underserved areas.
While Wall Street is unanimous in its belief Aviat will beat the market, CAPS members are a little more circumspect in their support, with a full 20% of those rating the wireless network services provider believing it will fall short.
Add Aviat to the Fool's free portfolio tracker to keep abreast of developments and see if it will ever find its way out of the wilderness, and see what others are saying on the Aviat Networks CAPS page.
At the time this article was published Fool contributorRich Dupreyholds no position in any company mentioned. Check out hisholdings and a short bio. The Motley Fool owns shares of Open Text.Motley Fool newsletter serviceshave recommended buying shares of SXC Health Solutions and Open Text, as well as writing puts on Open Text. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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