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

Aeropostale (NYSE: ARO  ) **** (14.0%)
Clearwire (Nasdaq: CLWR  ) *** (13.5%)
Affymax (Nasdaq: AFFY  ) ** (8.5%)

Market bulls have put together two consecutive days of significant gains, erasing most of November's losses. Yesterday the Dow was up another 106 points, or 1%. Amid that general upsurge, stocks that went significantly in the other direction are still big deals.

The devil's in the details
While most retailers were a horrible place to invest your money throughout the recession, Aeropostale and Buckle (NYSE: BKE  ) were two industry standouts. Going into the Christmas shopping season, investors had every reason to believe that both would continue to outshine their rivals.

Buckle sported a 7.9% gain in same-store sales in November, well ahead of analyst expectations of 3.6%, and even Abercrombie & Fitch (NYSE: ANF  ) continues building on the gains it's made recently, reporting a 22% jump. But Aeropostale saw comps fall 1% for the month. It got a slight boost on Black Friday, but that changed for the worse as the weekend progressed.

Despite what looks to be a series of mounting disappointments, CAPS member yosb thinks Aeropostale still looks better than a lot of its peers:

Aeropostale looks stronger than many of their competitors (e.g. [American Eagle Outfitters]), have no debt, and sustainable growth. Their P/E is about 1/3 of AEO while their return on assets is 3x higher. I think [Aeropostale] is currently mis-priced at $26.91 and has room to grow.

Let us know on the Aeropostale CAPS page whether it's still a fashion plate, or whether someone needs to call the fashion police.

The sky's not the limit
It wasn't a bad earnings report that sent Clearwire's shares tumbling, but rather its announcement of a $1.1 billion debt offering. Now, that should've helped allay fears about its ability to remain operational, and given it breathing room to continue challenging Verizon and AT&T as they roll out 4G networks. But it seems more of a move designed to protect Sprint (NYSE: S  ) and its 54% stake in the company. Sprint just started seeing some of its best subscriber growth numbers in years, and its stock jumped on the news that Clearwire had secured the lifeline.

CAPS member darkbite retained confidence in the data service provider:

stock will drop at opening bell on management cash conversation plan. however, its assets are valuable and either should raise capital or be acquired. They are valued under book value.

More than 570 CAPS members have indicated their preference for Clearwire, but only you can decide whether it's right for your portfolio. You can add it to Fool.com's free portfolio tracker, and have all the Foolish news and analysis compiled together for you in one spot.

A big disconnect
Considering the massive plunge Affymax investors suffered back in June, after it reported phase 3 trial results for its investigational drug Hematide, yesterday's stumble isn't such a big deal. The biotech has been bouncing along at these price levels for about six months now, but it's down about 19% since it announced Monday that it would submit the drug to the FDA for review in the second quarter of 2011. Perhaps investors were hoping for something to happen a little sooner.

Even if the drug is approved, Affymax may have patent dispute problems, like the one with Johnson & Johnson (NYSE: JNJ  ) that sank its shares in October. Yet with almost 80% of the CAPS members who've rated the biotech betting on it to outperform the broad market averages, it seems they think it will be able to overcome these hurdles, even if its two-star rating also suggests that they think there are better places for your money.

Not sure whether Affymax is right for your portfolio? You can track its progress by adding it to your watchlist and following along as developments occur.

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.

Johnson & Johnson is a Motley Fool Income Investor pick. Motley Fool Options has recommended a diagonal call position on Johnson & Johnson. The Fool owns shares of Aeropostale and Johnson & Johnson. 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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