The sell-off of the Dow Jones Industrial Average since the presidential election continued yesterday with the index dropping another 185 points, or 1.5%. Since last Tuesday, the Dow has given up 675 points, or more than 5%, as the prospects for major tax increases loom and political gridlock remains unchanged.
As bad as things were on the day with the index, the three stocks below managed to do even worse, plummeting by double-digit percentages. Now don't go running over the cliff with them like a bunch of lemmings: it could just be a temporary situation. Let's first see whether they had good reason to fall as panic-fueled routs can sometimes lead to excellent buying opportunities.
Trina Solar (NYS: TSL)
AK Steel (NYS: AKS)
Gold Resource (ASE: GORO)
Ain't no sunshine
I've long held that the solar industry can't survive as currently structured. As prices fall and government subsidies dry up, the industry is confronted with a serious case of don't-want-its from consumers. There's just nothing left to prop up the solar shops. Trina Solar may have been affected the worst yesterday as its stock plummeted 19% after it slashed shipment estimates, but it was a condition endemic to the entire space: Suntech Power (NYS: STP) fell 10%, LDK Solar (NYS: LDK) was down 8%, and both Yingli Green Energy (NYS: YGE) and JA Solar (NAS: JASO) were off more than 5% each.
After cutting shipment estimates by as much as 20%, Trina laid the blame not only on the demand-supply imbalance in the industry, but also said some of its competitors were simply out of their minds, calling their pricing practices "irrational."
Whatever future there is for solar, and for me it's more of a niche industry rather than a full-blown rival to fossil fuels, it's only going to come about after serious contraction and consolidation among its players. Look for that to begin in the near future and tell me in the comments section below whether you think Trina Solar will be a buyer or a seller.
Grinding to a halt
Steelmaker AK Steel is another stock on a multi-day run down to the basement. It's shares started their fall on Tuesday after it said fourth quarter losses were going to be worse than it previously thought as prices were going to be lower and it was facing a big tax bill. It continued the drop yesterday after announcing it would be selling 25-million shares in a secondary offering, suggesting its finances were extremely weak, which is what Standard & Poor's said when it cut AK Steel's corporate rating another notch deeper into "junk" territory. Today ain't any better as the stock is down another 7% in early morning trading.
Steel companies like AK, U.S. Steel (NYS: X) , and ArcelorMittal (NYS: MT) got their hopes up back in September that the new stimulus spending program China announced would lead to more than just a slight uptick in steel demand. Thus, anyone with even a tangential relationship to steel saw its shares rise, most notably mining and resource plays like Cliffs Natural Resources (NYS: CLF) and Alpha Natural Resources (NYS: ANR) , though they've since been dealt a heavy blow by last week's elections.
Betting on "trickle down government" hasn't proved beneficial for many businesses, so let me know in the comments section below if you think AK Steel will fall into rust belt decay.
Digging a deeper hole
As right as I may have been about most solar shops, I've been equally wrong about junior gold miner Gold Resource, which merely continued a decline that began last week after it said it was going to restate the past few quarters of its financial filings because of improper reporting of production statistics. There were wide variances in the gold concentrates it was delivering to its buyer from one period to the next which caused it to have to settle for not being paid for some 1,800 ounces.
Almost two years ago I had serious reservations about the miner's abilities, because it couldn't meet SEC definitions of proven or probable reserves. I reiterated that outlook last year and noted GORO was still failing to keep up while also doling out stock options to management. But I changed gears a few months ago, believing it looked like it was time for it to transform itself into a low-cost miner like Goldcorp (NYS: GG) or Barrick Gold (NYS: ABX) .
Whatever the merits of that happening, it's apparent Gold Resource isn't yet ready for prime time and I'll be closing out my outperform rating on Motley Fool CAPS, the 180,000 member-driven investor community that translates informed opinion into stock ratings of one to five stars. Let me know your opinion on its restatement in the comments box below.
Goldcorp isn't experiencing the same problems as Gold Resource; indeed, it is one of the leading players in the gold mining market. For the last several years, investors have been the beneficiaries of several successful acquisitions and strong organic growth. Goldcorp's low-cost production of one of the most sought-after metals in the world continues to make it an attractive choice for long-term investors. Click here for our detailed report to discover more about this mining specialist.
The article The Daily Grind Dragged These Stocks Lower originally appeared on Fool.com.
Rich Duprey has no positions in the stocks mentioned above. The Motley Fool owns shares of ArcelorMittal. Motley Fool newsletter services recommend Suntech Power Holdings Co.Try any of our Foolish newsletter services free for 30 days. We Fools may not 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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