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

Bank of Ireland (NYSE: IRE  )

***

(23.4%)

Allied Irish Bank (NYSE: AIB  )

****

(19.8%)

Harbin Electric (Nasdaq: HRBN  )

****

(14.9%)

The market tumbled by 142 points yesterday, or 1.3%, as North Korea attacked its southern rival militarily, but stocks that went down significantly more are still big deals.

The devil's in the details
It was a short-lived, feel-good moment for Irish banks last week as the government acceded to demands that it accept a bailout from the European Union. Yet as the enormousness of the bailout is realized and the meaning of the austerity measures that need to be implemented are confronted, protests and riots have spread across the country, and the government itself is in danger of collapsing. Both Bank of Ireland and Allied Irish Bank tumbled as the crisis unraveled.

The danger is that the government doesn't have the political will to actually implement the austerity measures necessary to receive the bailout funds. Worse, the cost of bailing out the banks themselves is skyrocketing, and some analysts expect the tab to be at least double what the government is forecasting.

When the EU bailed out Greece earlier this year, it helped calm the markets, and Greek banks such as National Bank of Greece (NYSE: NBG  ) got a bounce from it (though it's since continued to plummet in value). Although Portugal is seen as the next country to implode, bond traders are already looking at Spain as the next big target. Although Banco Santander (NYSE: STD  ) is generally seen as a financially capable institution, earnings are expected to fall below expectations, and investors are right to wonder whether it can withstand the onslaught.

As CAPS member Groovy99 says, putting your money into Allied Irish Bank these days is little more than a gamble.

A speculative play in an economic minefield. Like roulette at the casino, then you should like this stock. But at near a buck a share, I think [it's] worth a small position.

With the reluctant bailout acceptance by the Ireland Government, I think this bank is one of the "too large to fails." I think the gamble is a possible few dollar upside. But maybe a few more if you are looooong term.

It's not much different for those betting on Bank of Ireland to survive this ordeal, scathed or unscathed. Still, All-Star member tad40 views the bank as a low-risk investment at this point.

Way oversold! Ireland bailout is a sealed deal. There will be no nationalization for IRE and the bailout will be used as a "stand-by fund" which will be available to the bank anytime it needs it. So [Bank of Ireland] will be seen as a well capitalized bank. Consequently, there should not be any dilution to the shares of the existing shareholders. [Bank of Ireland] now has plenty of money to borrow with low interest payments and since the fund is already guaranteed under the Irish government, the international market will view [Bank of Ireland] to have close to 15% of Core Tier 1 capital and [Bank of Ireland] will be back in business. Go [Bank of Ireland]!

Follow Bank of Ireland by adding it to your watchlist and deposit your thoughts about its peer on the Allied Irish Bank CAPS page.

The sky's not the limit
It's not a potential bailout that's sending Chinese electric-motor maker Harbin Electric spiraling downward. Rather, it's questions about the veracity of its financial statements -- questions such as those that have plagued myriad Chinese small-cap stocks. RINO International (Nasdaq: RINO  ) essentially admitted that it lied to investors by creating customers out of thin air.

I've also expressed some doubt about Harbin's peer China Electric Motor (Nasdaq: CELM  ) because of a too-cozy relationship with related parties. But CAPS member GorillaGorilla says the company has taken high-profile public measures to deal with any concerns: "[China Electric] also intends to upgrade their auditor -- once again not the work of a company trying to work in the shadows. I intend to give CELM the benefit of the doubt knowing that the auditing is being beefed up -- others might not."

Harbin Electric looks as if like it might have found a way to wiggle out of the hard questions being asked as its CEO wanted to take the company private again with backing from private-equity firm Baring for $24 a share. But Baring has bailed on the deal, though the reason has been left unsaid. Harbin's CEO still wants to pursue the action, perhaps with new investors, but they may be hard to come by as investors grow skittish about these companies.

CAPS All-Star TMFCandyMountain thinks the allegations against Harbin are strong enough to expect it to underperform the market, even though 96% of all CAPS members rating the motor maker think just the opposite.

Only you can decide whether Harbin Electric will be a hot investment again. Add it to your watchlist 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, that 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 at 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.

The Fool owns shares of National Bank of Greece. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 

Fool contributor Rich Duprey has no a financial position in any of the stocks mentioned in the article. You can see his holdings. The Motley Fool has a disclosure policy.


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