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)

Wednesday's Change

A-Power Energy Generation Systems (Nasdaq: APWR  )

****

(25.5%)

Motricity (Nasdaq: MOTR  )

*

(10.5%)

Magic Software (Nasdaq: MGIC  )

**

(7.4%)

The market put all of its concerns aside yesterday and rocketed ahead 254 points, or 2.3%. Stocks that fell significantly amid this upward rush are even bigger deals.

The devil's in the details
It's easy come, easy go for Motricity. Just the other day, the mobile-data-solutions provider to Verizon, AT&T (NYSE: T  ) , and Sprint Nextel (NYSE: S  ) surged forward on an analyst upgrade by JPMorgan Chase, which predicted that new deals with major carriers in India and Malaysia would drive growth. Yesterday, investors apparently thought that the huge run-up in the stock price since its June IPO made this a propitious time to take profits. Even after yesterday's plunge, Motricity shares are up 193%.

Motor on over to the Motricity CAPS page, and let us know whether it's got what it takes to continue ringing the market's bells.

The sky's not the limit
It was bad enough that A-Power Energy Generation Systems reported wider losses than a year ago, as revenue plummeted 41%. But A-Power it added insult to injury when it also said it was looking to end its supply agreement with General Electric (NYSE: GE  ) by buying out the conglomerate's share in a joint venture.

Apparently, the air's becalmed around wind power, because A-Power is cutting its revenue projections for 2010 from $500 million down to $310 million. Investors have been concerned for a while now about the wind expert's staying power. Last month, it delayed releasing third-quarter results and was unable to reach a quorum at its annual meeting, forcing the company to adjourn that gathering for a second time.

CAPS All-Star TSIF acknowledges a number of the very real risks facing an investment in A-Power at this point, but thinks it will take only one good-sized order to send the stock soaring again:

Wind Power turbines remain uncommitted and power connector sales erratic. A large Wind Power order, 615MW is Texas, is on the edge of being either real or cancelled as financing is being sought. A-Power reported a $279 Million Dam project in China over 6 years. While this will come in slowly, it confirms (to me) that A-Power is able to earn large contracts. Uncertainty is a stock killer. Potential, however of a large order that would send A-Power up substantially makes the risk reward reasonable.

More than 1,100 CAPS members have indicated their preference for A-Power, but only you can decide whether it's right for your portfolio. You can put the wind power specialist into Fool.com's free portfolio tracker, and wind up your opinion on the A-Power Energy Generation systems CAPS page, too.

A big disconnect
No specific news seems to have sent Magic Software's shares down yesterday. Magic parlays its position as an IBM (NYSE: IBM  ) software partner to help businesses rapidly deploy applications that can be swiftly customized and integrated into existing systems.

Last month's third-quarter earnings report indicated that results were driven by greater demand for its professional services and improved license sales of its uniPaaS platform. Today, the company announced the signing of another deal with Celebri, a large ground-handling provider with operations in Turkey, India, and Hungary.

That might be the impetus to send its shares right back up. And those kinds of results lead CAPS member validpick to praise Magic's prospects:

All the right indicators are aligned for Magic Software: no debt, good margins, growth in net income, excellent cash flow. They are a conservatively managed company in a hot sector (cloud computing) with good technology, useful alliances and an impressive customer list.

Not sure whether Magic Software is right for your portfolio? You can track its progress by adding the software provider to your watchlist, where we'll aggregate all the Foolish news and analysis about this stock for you in one place.

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 merely react to the market's lead.

That's why it pays to start your own research on these stocks on Motley Fool CAPS. 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 IBM. 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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