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)

Past Week's Change

Power-One (Nasdaq: PWER  )

****

(20.73%)

Gerova Financial (NYSE: GFC  )

*

(19.27%)

Aegean Marine Petroleum Network (NYSE: ANW  )

**

(17.85%)

The market has enjoyed seven straight days of closing higher, swearing off concerns about world tensions. Indeed, the indexes hit 30-month highs, and the Dow crossed strongly over the 12,000 mark. Yet stocks that went in the other direction over the past week by large percentages could be even bigger deals.

The devil's in the details
Power-One, the second-largest provider of power inverters for the solar industry, short-circuited in its latest earnings report. While the company exceeded its own over-the-top revenue guidance for the quarter, its outlook for the rest of the year proved very cloudy.

Industry peer Satcon Technology  (Nasdaq: SATC  ) makes utility-scale power inverters, and it's been hoping to cash in on a rising trend of falling prices throughout the global solar cell module market. With pressure forcing prices down, the feasibility of utility-scale solar projects rises.

Power-One's projections pass a cloud over that bright future, at least for the time being, and both Satcon and Advanced Energy Industries (Nasdaq: AEIS  ) pulled back on the news as well. CAPS member mjtri remains undeterred, looking much further down the road:

Their renewable energy converters are really taking off. Good cash, low debt, free cash flow, and growing revenues should help them overcome the short term oversupply issues.

Let us know on the Power-One CAPS page whether it will be able to power up again in the near future.

A coming meltdown
Last December, reinsurer Gerova Financial got a bit of a boost from reports that it was in talks with British investment bank Seymour Pierce to form a combined investment bank/insurer valued around $600 million. But the euphoria didn't last long. Shares of the insurer plummeted the other day as short-sellers piled into the stock. The stampede stemmed from speculation over whether a Gerova employee banned by the SEC was actually violating the ban.

Worse, Gerova has failed to file any financial reports with the SEC since 2009, and a recent Forbes article highlighted the company's association with various people involved in Ponzi schemes. The potential involvement of one of those individuals attracted short-sellers in the first place. There's simply too much risk here for investors to seriously consider putting their money into play.

Some 60% of All-Star CAPS members who've rated Gerova believe it will underperform the market, and I agree. Let us know in the comments section below, or on the Gerova Financial CAPS page, how long you think this stock can hang on before succumbing.

That sinking feeling
Increased competition and rising costs are creating a widening gap between expectations and reality for fuel-products distributor Aegean Marine Petroleum. Catering to shippers, dry-bulk carriers, and tankers all over the world, it's been swamped by the generally poor outlook in the shipping industry, from plummeting dayrates to a perpetually declining Baltic Dry Index. With shippers and service providers like Nordic American Tanker  (NYSE: NAT  ) and Paragon Shipping  (Nasdaq: PRGN  ) also getting caught in the undertow, it's not surprising that Aegean's shares have been sent to Davey Jones's locker.

CAPS member jorgecorrear finds few competitors in Aegean's niche, which should lend itself to future growth when the shipping industry stabilizes. With a market value of just 9 times trailing earnings, it's quickly becoming a significantly undervalued opportunity. Add Aegean to the Fool's free portfolio tracker, and follow along as this shipping-services provider rides the waves of market discontent.

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.

The Fool owns shares of Power-One. 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.


Read/Post Comments (3) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 09, 2011, at 6:21 PM, Kurtmoe1 wrote:

    Yes, I am a Power-One fan!!! Also a Fool!!! I think PWER will recover quickly. I have been buying it this week under $8.85 and today at $8.65.

    Anybody else think it's a good buy right now? Or will it continue on it's downward trend?

    Thanks, Kurtmoe1

  • Report this Comment On February 09, 2011, at 7:45 PM, terry2518 wrote:

    I think the market over reacted and am a buyer here and waiting to see if it hits 8 to buy more long term great opportunity i am with u kurtmoe

  • Report this Comment On February 15, 2011, at 5:11 PM, Knowit1 wrote:

    GFC has nothing but paper value. They just bought a ponzi fund that dealt with insurance policies. I wouldn't get near them even if it were a penny stock.

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