Insider selling isn't always a sign of rough waters ahead -- the insider might need the money for Junior's education or for other reasons that have nothing to do with the business. And while stock dilution can be a bad thing, splitting a stock to make more shares available can be good in some cases.
Don't look down
What about lowering guidance? When a company forecasts lower sales or profits, its stock usually takes a hit. It's not always easy to tell whether your company is having a fire sale or burning down. Maybe it is time to get out -- or maybe it's time to buy more!
To help tell the difference, we pair up dour guidance news with the sentiments of the 180,000-member Motley Fool CAPS community. If the best stock pickers think the companies still have the power to turn lemons into lemonade, maybe investors should take notice.
Here is a list of stocks that have recently announced reduced guidance.
Altria (NYS: MO)
$1.60 - $1.66
$1.58 - $1.64
First Solar (NAS: FSLR)
$6.50 - $7.50
$5.75 - $6.00
DuPont (NYS: DD)
$3.97 - $4.05
$3.87 - $3.95
Source: Company releases.
Use this chart as a jumping-off point for additional research.
Lowering the boom
The government says its mandated warning labels on cigarettes are ineffective, so it wants to force Altria, Reynolds American, and Lorillard to place graphic pictures on cigarette packs. Making a smoker heave on the side of the road before lighting up is apparently better.
Tobacco companies have filed a lawsuit against the FDA, saying the regulation violates their free-speech rights, as the warning labels would have to constitute at least 20% of the packaging, more than even their own branding takes up. A District Court judge in a similar case wants the tobacco companies to pay for broadcast and print ads because, she ruled, the companies masked the dangers of smoking.
Altria lowered its earnings forecast slightly thanks to two lawsuits brought by relatives of smokers who apparently missed all those warnings that have been issued over the years on the dangers of smoking. Shares of the Marlboro Man trade near their 52-week highs and its dividend currently yields 5.5%.
I've joined with the more than 8,300 CAPS members who bet Altria will continue to outperform the broad market averages. Add the cigarette maker to your watchlist and tell me in the comments section below if you think its future will go up in smoke.
Sun setting on solar
Anyone who's read my scribblings on the solar industry understands I'm no fan of an investment in the space. The industry continues to expand its capacity to produce polysilicon, leading to a glut that's crushing prices and profits, making weak players even weaker, and undermining even those that appear more financially strong. Only takeover rumors like those that swirled around First Solar appear able to prop them up.
But worse for them, at least as I see it, solar won't be successful without government subsidies. In times of austerity like these, there's even less willingness than usual to shovel money their way. Despite all the gains solar has made, this renewable-energy source really struggles to survive on its own without taxpayer assistance. Right now, governments pay producers subsidies to make the product, and need to give consumers credits to buy it.
This was First Solar's second reduction in guidance in as many months; the one thing it does have going for it is, unlike LDK Solar (NYS: LDK) or panel maker JA Solar (NAS: JASO) , it uses cadmium telluride rather than polysi.
I've already bet against First Solar on CAPS -- and by extension Warren Buffett, who bought its solar farm -- but you can have your say about its future on the First Solar CAPS page and by adding it to your watchlist.
South of the border
If you're investing based on quarter-to-quarter projections, then you'd be worried by DuPont's lowering guidance for this year as it continues to feel the impact of slower-than-expected growth in the fourth quarter. Recently, 3M (NYS: MMM) said such flagging prospects were brought on by deteriorating conditions in the consumer electronics industry and would likely extend into 2012.
Yet look a little further out than next week, and you'll find DuPont is much more upbeat about its chances next year and actually raised its guidance as much as 12% above the midpoint of its forecasts for 2011. Like Monsanto (NYS: MON) , which raised guidance on the basis of better business growth opportunities in South America, DuPont sees solid results in Latin America. Even further out, the specialty products and chemicals maker is looking for sales and earnings to grow at a compounded annual rate of between 7% and 12%.
CAPS All-Star naughtyguy is still concerned about the lower guidance, particularly in light of the debt load DuPont carries, but BinyaminK likens it to a tortoise and says it will win the race, slow and steady.
Tell us in the comments section below or on the DuPont CAPS page which side you come down on, and add the stock to your watchlist to see if it ultimately fuels a new growth phase.
Looking under rocks
These stocks have lowered expectations, but The Motley Fool has identified three companies that are quietly cashing in on the explosion of smartphones and tablet PCs. You can get instant access to these companies by clicking here -- it's free! But only for a limited time, so hurry.
At the time thisarticle was published Fool contributorRich Dupreyholds no position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of First Solar and Altria Group.Motley Fool newsletter serviceshave recommended buying shares of First Solar and 3M, as well as creating a diagonal call position in 3M and a synthetic long position in Monsanto. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not 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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