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)

Thursday's Change

Global Cash Access Holdings (NYSE: GCA  )

***

(22.9%)

Corinthian Colleges (Nasdaq: COCO  )

**

(12%)

MannKind (Nasdaq: MNKD  )

**

(11%)

From peak to trough, the market swung 186 points, though it ended the day down only 43, or less than a half percent. Thus, stocks that went down significantly more than that plunge could be big deals.

Rolling snake eyes
From a glance at a stock chart of Global Cash Access, it appears that this provider of ATMs to the gaming industry is walking down the stairs to the basement. A guidance cut at Global Cash caused yesterday's leg down, as third quarter profits fell by 39% and revenue came in below expectations.

Yet the blame Global Cash placed on tight credit and a weak economy seems to belie the results casinos have been posting. MGM Resorts International (NYSE: MGM  ) and Wynn Resorts (Nasdaq: WYNN  ) both posted better earnings year over year, and while Macau really helped roll their numbers, even Vegas didn't come up craps. While MGM saw a 9% drop in casino revenue, Wynn recorded a 3% increase, and both foresee recovery in 2011.

With 85% of the CAPS members who've rated Global Cash indicating it will outperform the market, it seems they, too, were betting that the company would cash in on gaming's improvement. Now that it's busted, let us know on the Global Cash Access CAPS page whether we should cash in our chips or double down from here.

A failing grade from Uncle Sam
The drop Corinithian Colleges' stock suffered might not be as dramatic or as steep as Global Cash's, but it's just as steady nonetheless. The for-profit educator's latest plunge stemmed from fears that the Department of Education will resume its crusade against Corinthian and its ilk.

Apollo Group (Nasdaq: APOL  ) reported that its University of Phoenix was undergoing another review of the way it administers federal financial aid. Only a few months ago, it endured a similar review and repaid $1.8 million; now the DOE wants to examine the 2009-2010 school year.

Moreover, DOE is going back three years into the past to look at students who left school and defaulted on their student loans. The for-profit educators say this retroactive investigation, which could result in the schools losing their eligibility to receive student loan funding, is unfair because the new rules regarding eligibility were only just implemented.

Highly rated CAPS All-Star albaitis thinks that while crackdown fears have caused Corinthian Colleges to sag, there's still plenty of value to be had in the stock:

Depressed price and many fears because investors are worried about breaking 90/10 rule (meaning that the institution is making over 90% of their money from the govt. which could result in some fines)

The company owns over 100 separate colleges. They aren't going anywhere.

I see lots of hidden value here. This company is barely trading above the value of its PPE and it seems obvious that there are lots of intangibles involved in education.

Only you can decide whether Corinthian Colleges still makes the grade. Add it to your My Watchlist page, where we'll aggregate all our Foolish news and analysis about this stock for you.

Tempest in a test tube
Allegations of "scientific fraud" are serious, to say the least, and could represent a major roadblock to MannKind's inhaled insulin treatment Afrezza getting approved. They quickly conjure images of the problems Sequenom (Nasdaq: SQNM  ) faced following its episode of "mishandling data."

MannKind's former senior director of regulatory affairs charges that the company withheld from regulators important information about fraud that occurred in Russia and Bulgaria during clinical trials of Afrezza, including the possibility of "fictitious patients." For its part, MannKind says it will vigorously defend itself against the allegations, and seemed to suggest the tempest had more to do with a terminated, disgruntled employee. MannKind said it conducted an independent review of the allegations and found them completely without merit.

MannKind already had its skeptics, with nearly 20% of the CAPS members who've rated the biopharmaceutical pegging it to underperform the market. These charges undoubtedly buoy their skepticism. Although some analysts have hailed the company's newly lowered share price as a buying opportunity, and it's tempting to believe MannKind management's assurance that it conducted the trials properly, investors would probably be better served waiting for the dust to clear.

Tell us on the MannKind CAPS page whether you think it's better to wait for the company to exhale before jumping in.

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's 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.

Sprint Nextel is a Motley Fool Inside Value recommendation. 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.

Fool contributor Rich Duprey currently does not own any stocks as you can see here. The Motley Fool has a disclosure policy.


Read/Post Comments (1) | Recommend This Article (6)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 05, 2010, at 4:07 PM, steven107 wrote:

    Regarding MNKD issue. I wanted to note that Geoff from Gekkowire.com mentioned in an article that a similar complaint has been made before. A quote below:

    "...Back in June 2007, the company was forced to settle with a former employee after very similar charges were brought against the company. At the time Wayman Cheatham, then the company’s former vice president of medical and regulatory affairs, alleged that he was forced out of MannKind in 2005 after raising concerns that the firm had presented false and misleading information to the Food and Drug Administration."

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