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

Arena Pharmaceuticals (Nasdaq: ARNA  )

**

(18.5%)

Uranerz Energy (NYSE: URZ  )

*

(14.9%)

Ford (NYSE: F  )

***

(13.4%)

On Friday, the market dove 166 points, or 1.4%, as protests and riots in Egypt led investors to seek safety. Naturally, oil soared. Yet stocks that went down by even larger percentages are also big deals.

The devil's in the details
After the FDA keelhauled Arena Pharmaceuticals' locaesrin plans, the biotech announced that it would have to trim the fat from its staff, reducing its head count by 25%. The delay pushes Arena behind Orexigen (Nasdaq: OREX  ) , whose fat-fighting treatment Contrave got a surprise FDA panel endorsement earlier this month.

Worse yet, the staff cuts may hinder Arena's ability to run any tests the FDA might request to ensure that lorcaserin won't follow in the footsteps of Abbott Labs' (NYSE: ABT  ) Meridia. The rival treatment, once seen as a cure-all for the obese, was subsequently associated with heart problems.

Highly rated CAPS All-Star member PhillyDan argues that a panel of pathologists hired by Arena will validate locaserin's efficacy, making the FDA's request for a supplemental test unnecessary:

Absolutely they should not do the 12-month study that the FDA asked them to consider doing. The three month study will suffice and prove what the FDA needs to know that Lorcaserin does cause an increase in prolactin in rats.

The five independent pathologists have done their review and Arena is awaiting the final report from the CRO. If that report backs up Arena's original classification submitted with the NDA, then technically, the rat data issue should go away.

The biotech is still widely popular with the CAPS community; 93% of members who've rated Arena think it will ultimately win out. Let us know on the Arena Pharmaceuticals CAPS page whether you agree.

A coming meltdown
Last November, Uranerz Energy seemingly got a lift from the crisis developing on the Korean peninsula at the time. But the collapsing Egyptian government doesn't seem to have the same salutary impact on it or fellow uranium play Uranium Resources (Nasdaq: URRE  ) . Uranerz's stock will also have to deal with the accelerated repurchase of 4.2 million warrants it announced the other day, at a price of $3 each. That overhang will take a while for the market to work through.

CAPS member john603 thinks the accelerated repurchase may relate to the uranium databases Uranerz acquired last August for the Powder River Basin:

This has been a tremendous stock for me. I have known the area for years. The million mile drill hole library purchase may be why they did the secondary. They now know where the U is.

This library of information is one of the largest collections of drill logs, drill hole location maps, cross-sections, and geological and technical reports covering Wyoming. But there's an almost equally large level of doubt about Uranerz's ability to capitalize on that treasure trove of data. More than a third of the CAPS community members rating the uranium miner doubt its ability to beat the market.

You can follow along with Uranerz's trials and tribulations by adding the stock to the Fool's free portfolio tracker.

Get your motor running
In 2010, Ford absolutely owned automotive rivals General Motors, Toyota (NYSE: TM  ) , and Honda. It stole market share from everyone; boosted its profile, sales, and quality; and made its likelihood of surviving for another 100 years a distinct possibility.

Yet its fourth-quarter earnings report also showed that the easy work is behind it. GM will probably return to form as it unveils new models later this year, and sooner or later, Toyota will stop recalling its cars. Now, Ford must compete to maintain mindshare, and last week some investors feared that the company's efforts to do so would slip like a faulty clutch.

It's hard not to agree with CAPS member Ineedmoney101, who believes that Ford will benefit just from significantly reducing its debt load:

Ford stock was hammered this morning, but people dont realize that the economy is just now getting going, earnings are still high for the year, and should be higher next year. They should gain around $250 million every quarter next year just from paying off debt and avoiding all of that interest! PLUS increased earnings.

Ready for a resurrection
Just because your stock has taken a beating doesn't mean it'll roll over and die. Markets often overreact. 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 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.

General Motors is a Motley Fool Inside Value pick. Ford is a Motley Fool Stock Advisor selection. Motley Fool Alpha owns shares of Abbott Laboratories. 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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  • Report this Comment On February 02, 2011, at 7:04 AM, yipeokia wrote:

    We do need to wake up and smell the coffee as far as responsible nuclear production of power is concerned ! I remember right after three mile Island happened, the " chicken littles " in Hollywood created the movie " The China Syndrome " with ( Hanoi Jane ) Fonda which created terror amongst the hand- wringing liberals, and made many people fear Nuclear Power. It's amazing that the effects are being felt 35 years later. We have to be smart and harness this clean and efficient source of energy ( which also has a very small carbon footprint ), and tell our little oil producing sand buddies to go stuff it !

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