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)

Friday's Change

China Nepstar Chain Drugstore (NYSE: NPD  )

****

(8.5%)

Sterlite Industries India (NYSE: SLT  )

****

(6.1%)

China Digital TV (NYSE: STV  )

*****

(5.6%)

The market dropped nearly 100 points on Black Friday, a shortened trading day, as the European financial crisis flared anew. But stocks that went down significantly more are still big deals.

The devil's in the details
With almost 2,600 stores in its network, China Nepstar Chain Drugstore is the country's largest retail drugstore chain, but it's having a rocky go of it nonetheless.

Like Walgreen (NYSE: WAG  ) here stateside, Nepstar is increasingly acting like a grocery store with a growing percentage of convenience and consumable items. Walgreen did it to differentiate itself from CVS Caremark (NYSE: CVS  ) , but Nepstar is seeing the impact of the move on profits as gross margins fell sequentially from one quarter to the next even as they boost sales. Yet coupling government price controls on prescription and OTC drugs with new minimum wage increases means the Chinese drugstore chain is facing a passel of rising costs.

The choppy results Nepstar reported caused its stock to bounce around lately. CAPS member wecan isn't so concerned as China's demographics make further expansion and growth a possibility. The CAPS member likes that Nepstar is offering dividends more than 5%, and its revenue growth rate in the past three years is more than 19%. wecan might jump in and buy shares of the company if the prices drop more, but it's a wait-and-see.

Head over to the China Nepstar CAPS page and let us know if this drugstore chain has the right prescription for growth.

The sky's not the limit
Last quarter, copper miner Sterlite Industries' earnings were hurt because of a three-week shutdown for maintenance at its smelter, resulting in a 26% drop in copper cathode production, though it's having better luck with zinc production, which is at record levels. Fortunately, prices for both metals are significantly higher than they were a year ago, and the bailout of Ireland over the weekend gave them a boost.

Although they are higher than they were when Sterlite reported, copper prices had fallen over fears the sovereign debt contagion would spread to other countries, sending shares of top copper and gold miner Freeport-McMoRan (NYSE: FCX  ) lower. That leads some to think it might be time to sell Freeport from your portfolio.

Yet such macroeconomic developments are giving investors hope that higher metals prices are still possible. CAPS member jonconnery thinks it's simply a matter of when, not if.

Inflation is coming, just a matter of when, not if! Commodities-tangibles will compensate holders ... and adjust appropriately.

Some 1,100 CAPS members have indicated their preference for Sterlite, but only you can decide whether it's right for your portfolio. You can put the copper miner into Fool.com's free portfolio tracker, and deposit your opinion on the Sterlite Industries CAPS page, too.

A big disconnect
China Digital TV has been rockin' and rollin' lately, too, jumping more than 16% one day only to tumble back down the next. Investors were initially elated by the prospects of a $2-per-share special dividend the company announced, but the realization that doling it to shareholders rather than investing it in the business means attractive opportunities might be limited.

Yet there will be the forced migration from analog to digital signals by 2015, and with China Digital owning half the smart-card market in the country, it will likely be a prime beneficiary. Stunning gains were made here in the U.S. by tech leaders such as Dolby Labs (NYSE: DLB  ) when our own switchover began, so it's natural to think similar results can be obtained by China Digital, too. It may just take time for their efforts to bear fruit.

You can track its progress by adding the smart-card leader to your watchlist, where all the Foolish news and analysis about this stock will be 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'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.

China Digital TV Holding is a Motley Fool Rule Breakers selection. Dolby Laboratories is a Motley Fool Stock Advisor recommendation. Sterlite Industries is a Motley Fool Global Gains pick. 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 does not have a financial position in any of the stocks mentioned in the article. You can see his holdings here. The Motley Fool has a disclosure policy.


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