Why Did My Stock Just Die?

Your stock just took a nosedive -- but 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:

Stock

CAPS Rating (out of 5)

Tuesday's Change

Universal Travel Group (NYSE: UTA  )

****

(5.2%)

China Agritech (Nasdaq: CAGC  )

**

(6.4%)

Alexza Pharmaceuticals (Nasdaq: ALXA  )

**

(8.0%)

The devil's in the details
On a day when the market was up big at 193 points, or almost 2%, Tuesday's stocks that went big in the other direction are big deals.

As priceline.com (Nasdaq: PCLN  ) , Expedia, and Orbitz Worldwide (NYSE: OWW  ) have shown, the online travel business can provide hot growth opportunities, particularly in Asia. Chinese online travel agent Universal Travel Group has been trying to tap into that same market, but got jostled by the turbulence created by a blogger relentlessly pounding on the veracity of its financial statements (we're getting a lot of that out of China these days, no?).

The big news for UTA was not that it hired a somewhat more notable accounting firm, as it highlighted in a press release issued yesterday, but rather that its old firm quit just one month after it was hired as it had to inform the Securities and Exchange Commission (no press release offered for that).

There are still plenty of adherents supporting Universal Travel, and 92% of the CAPS members rating the stock mark it for outperformance. But there are so many red flags raised about this company that investors would do well to tread carefully here.

The sky's not the limit
After a big 50% run-up in its stock from August through September, shares of Alexza Pharmaceutical have been in a rout. While they were down yesterday when the market was up big, they're off 24% from their recent highs (though they're bouncing up 8% today as I write).

Oct. 11 is quickly approaching, and that's the date it finds out whether its new drug application for AZ-004, its treatment for agitation in schizophrenic and bipolar patients, gets approved. Maybe investors are fretting that after having been on a tear for so long, a Food and Drug Administration that's been rejecting a number of drugs over safety concerns -- weight-loss treatments from Arena Pharmaceuticals (Nasdaq: ARNA  ) and VIVUS (Nasdaq: VVUS  ) -- won't look kindly on Alexza's treatment either.

Analysts at Piper Jaffray, though, are convinced it will get the nod, but respiratory safety issues remain a concern. CAPS member totallyoblivious is all too familiar with the vagaries of FDA approval, and while he thinks Alexza will rise again, he's not willing to stay in the stock up to the hearing.

I think it's retraced enough here. Should be poised to make another run before October 11th. Just make sure to close your position before that date unless you want to gamble on the whims of the FDA.

Don't bring me down
It's obvious concerns about what Chinese companies are telling us are weighing heavily on shares. China Agritech is yet another Asian small cap that gets closer scrutiny about the results it has been reporting. Short interest on the organic liquid compound fertilizer maker has been pretty steep lately, but renewed skepticism has added to the sense that there's something afoot here. It was just last month that shares got whacked by concerns over relationships the company had with its auditor.

While China Agritech has said it will be hiring one of the big four accounting firms to go over its books, we haven't seen anything yet and unless and until that happens -- and they don't go running for the exits like Universal Travel's did -- expect the fertilizer maker to be volatile.

With 92% of CAPS members rating it to outperform the market, it seems they're expecting most of the concerns to blow over.

Let us know in the comments section below or on the China Agritech CAPS page if this stock is just pedaling fertilizer to investors. You can also add it to your My Watchlist page, where all the Foolish news and analysis about this stock is aggregated for you.

Ready for a resurrection
Just because your stock has taken a beating doesn't mean it's going to roll over and die. Markets are known for overreacting. A closer look at what has happened to your stock can give you an edge over other investors who just react to the market's lead.

That's why it pays to start your own research on these stocks on Motley Fool CAPS where you can read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from the stock's CAPS page. Then you can decide for yourself whether it's ready to come back from the dead.

priceline.com is a Motley Fool Stock Advisor choice. Try any of our Foolish newsletter services free for 30 days

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Motley Fool has a disclosure policy. Fool contributor Rich Duprey currently does not own any stocks as you can see here.


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