2 Stocks Stopping the Presses
You saw the headlines. You know your stock price made a big move. But what does that mean for your investment's future?
By pairing the latest news with the collective wisdom of our 180,000-strong Motley Fool CAPS investing community, we might be able to discover whether your stock's latest exploits are a short-term hiccup -- or the start of a much bigger trend.
These two stocks both made big moves over the past five trading days, one up, one down:
CAPS Rating(out of 5)
Change Past Week
|Patriot Coal (NYS: PCX)|
|Groupon (NAS: GRPN)|
Source: Motley Fool CAPS, % change from May 11 to May 18.
72 inches down
Boy, things can change in a hurry when you're Patriot Coal, and not for the better. One week it was reporting fairly disastrous first-quarter results and saying its second-quarter outlook wasn't looking so hot either, with 4.9 million tons in coal sales at $138 per ton. The next week, it was saying one of its customers might actually default and sales will likely be 3.9 million tons, though at $142 per ton.
The coal industry in general is reeling. Because natural gas is at its cheapest level in decades -- prices are at historically low levels even though they've bounced off record lows -- utilities are switching from coal to gas. Coal prices have fallen as well, particularly for thermal coal, but gas is cheaper still. Alpha Natural Resources (NYS: ANR) has cut thermal coal production, and despite Peabody Energy's (NYS: BTU) assurances to the contrary, the "supercycle" for coal doesn't seem to be intact. With the Obama administration encouraging through clean-air regulations the demise of coal-fired power plants, there's not much incentive for utilities to even consider building one.
Internationally, the situation isn't much better, and it could get worse before it does get better. China, the world's biggest consumer of coal, is suffering a spate of buyers deferring or defaulting on coal deliveries. China's economy is slowing quicker than many analysts anticipated, and six coal shipments were recently defaulted on as the buyers chose not to accept delivery. The country's voracious appetite for coal was one of the few hopeful spots for propping up the coal industry.
While 95% of the nearly 500 CAPS members rating Patriot think it will outperform the market, but with weaker demand and Standard & Poor's lowering its credit rating, investors may want to take a second look at its prospects. Tell us in the comments section below or on the Patriot Coal CAPS page if you think the miner will cave in, then add the stock to your watchlist to see if the trend can turn.
Groupthink or better times coming?
Daily deals specialist Groupon had a big group of investors pushing its shares higher last week after reporting what appeared to be better than expected earnings results. Its North American business turned in a strong performance with business jumping 33% pushing it to a first-ever quarterly profit, albeit just a penny.
Yet after peaking at almost $15 a share, the stock has slid back 22%, no doubt reflecting the fear that not only can it not duplicate that effort again, but also that it's guidance hides a coming slowdown. With accounting issues still troubling the dealmaker, I've maintained my underperform rating on Groupon.
Despite the buzz from Facebook's IPO, don't expect any sort of halo effect. The offering was a disaster marked by snafus from the Nasdaq exchange and the stock itself has already fallen through the IPO price and is heading lower -- very similar to what Groupon experienced. These social media offerings seem to have the sustaining quality of cotton candy.
Pandora, Zynga (NAS: ZNGA) , and Yelp all went public on the buzz that social networking would be a trend to capitalize on in a bid to out-Facebook Facebook, yet all have plummeted in the aftermath. Only LinkedIn, the grown-ups' version of social networking, has managed to rise higher, though even it has fallen steeply in the past week.
Only 10% of the nearly 800 CAPS members rating Groupon think it will outperform the market averages, and even fewer All-Stars think it will beat the Street. Add the daily deals site to the Fool's free portfolio tracker to see whether it flames out once again or it's finally getting its act together and actually represents a good deal at these prices.
Read all about it!
Both of these stocks made a lot of noise this week, but if they carry too much risk for you, consider this: The Motley Fool has found a stock with so much promise that we've dubbed it: "The Motley Fool's Top Stock for 2012." This up and coming multibagger is highlighted in a free report that discusses how it's revolutionizing commerce in Latin America. You can get instant access to the name of this company by clicking here to download it now.
At the time this article 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 LinkedIn.Motley Fool newsletter serviceshave recommended buying shares of LinkedIn. The Motley Fool has adisclosure policy.We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.