Why Did These Stocks Just Die?

Updated

Oh, here's a shock: There are still financial troubles in Europe and Spain rattled the cage by delaying a decision on whether it will take a bailout from the EU. The market didn't like the nerve-rattling uncertainty that projected and promptly took a tumble.

Some companies, however, had their own problems to contend with, some even plunging by double-digit percentages. So let's see whether they had good reason to drop, as sometimes panic-fueled declines can lead to excellent buying opportunities.

Storm clouds rising
I've been saying for a while now that First Solar (NAS: FSLR) was offering up predictions that were simply too rosy to be believed. I've pointed to industry peers such as Trina Solar (NYS: TSL) , Yingli Green Energy, and JA Solar (NAS: JASO) , which are all indicating that things were slowing down yet First Solar went on like it was still boom times -- OK, it slashed its workforce earlier this year, but its recent guidance belied what was seemingly obvious everywhere else.


Now First Solar is putting a halt to the NRG Energy (NYS: NRG) Ague Caliente solar power plant project in Arizona, saying it's too far ahead of schedule and has to slow down to meet contractual milestones. Or, as Maxim Group's Aaron Chew, suggests, it's just been pulling so much business forward to make things appear sunnier than they are, and now some real dangers lurk next year and the year after. Yet with all the revenue that First Solar's recognized as a result of the pull-forward process, it may have recognized it prematurely.

First Solar's gained a lot of points since its last earnings report, but I haven't changed my expectations that it will give them up. Yesterday's drop was only the start of the rationalization process.

Not rectifying the situation
After a two-day rally that sent shares of Molycorp (NYS: MCP) 28% higher, it seems some investors decided to take some profits as there was no news that would account for the recent decline. It did finish its secondary offering of convertible senior notes and common stock, a cash-raising strategy it announced several weeks ago that the market took a severe disliking to. Back then, its stock plunged 24%. While the money does give it some breathing room and allows it to continue its capital spending program, it still dilutes current shareholders. Insiders, though, including several directors, the CEO, and the CFO, all got the convertible notes that valued Molycorp at $10 a share, suggesting they believe the miner is worth at least that.

I'm still leery of its ability to maintain its value despite the seeming vote of confidence because of the convertible debt it acquired when it bought a Canadian rare-earth metals processor in June, not to mention its own level of indebtedness and whether it will be able to fulfill the promise of its Mountain Pass mining operation. Standard & Poor's is doubtful, too, and downgraded Molycorp's credit rating to junk.

Still, highly rated Motley Fool CAPS All-Star saunafool finds hope in the future for Molycorp, particularly if "China clamps down on rare earth exports again," and says the "price has significant upside."

A threadbare opportunity
Independent oil and gas producer BPZ Resources (NYS: BPZ) was also taken down on no company-specific news, though its stock has remained depressed for some time now and is 50% off of its 52-week highs.

The action yesterday is contrary to the outlook offered the other day by S&P, which expects renewed investment in the Peruvian oil and gas industry -- as well as mining, infrastructure, and electricity -- to keep the country's GDP on a modestly strong growth trajectory. They're looking for 5.5% GDP growth over the next five years, which is slightly below the 7% rate it's enjoyed over the past five years, but still healthy nonetheless.

BPZ drills primarily in Peru but also has assets in Ecuador. Earlier this month, the energy producer reported quarterly losses compared with gains recorded last year, as it incurred higher costs related to exploration along with lower production and lower prices received. The average net oil sales price was $101.00, compared with $106.12 for the same period last year. But with its Albacora and Corvina fields in place, and new 3-D seismic activity under way in its Block Z-1 region that it's working to develop, BPZ's management believes the oil and gas driller is positioned to improve its outlook.

I would have to agree with CAPS member WHC01 that an investment here is highly speculative, but also that there's "a good chance for double if the [political] environment in Peru remains stable." I'm rating BPZ Resources to outperform the market indexes on CAPS, but tell me below if it's too speculative for your portfolio.

Ready for a resurrection
These stocks cratered, and not all the declines were unjustified, but The Motley Fool has a new premium report out on First Solar with a detailed look at the company's market position and potential. Included are a look at the key areas investors must pay attention to. The report comes with updates when big news happens, so you can always stay up to date on the solar shop's progress. Get the details.

The article Why Did These Stocks Just Die? originally appeared on Fool.com.

Fool contributor Rich Duprey holds no position in any company mentioned. Check out hisholdings and a short bio. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.

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