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)

Yesterday's Change

Deer Consumer Products (Nasdaq: DEER  ) * (21.65%)
Sprint Nextel (NYSE: S  ) ** (13.66%)
General Maritime (NYSE: GMR  ) **** (13.42%)

After yesterday's 178-point jump higher, a 1.5% move, the stock market is now back above the 12,000 mark. Fears about a Japan nuclear meltdown are so last week, replaced by ebullience for strafing runs over Libya. So stocks that went in the other direction by even larger percentages are pretty big deals.

The devil's in the details
Oh, dear! After essentially bumping along at the $11-per-share level for almost five months, Chinese kitchen gadget maker Deer Consumer Products fell off the table yesterday for no readily apparent reason. There was a negative article that appeared on Seeking Alpha, giving us yet "another reason" to join the short-seller in bidding down the stock: mainly that it way overpaid for property, giving rise to the prospect of impropriety.

While it barely elicits a raised eyebrow anymore to find someone questioning the verity of a Chinese small-cap stock, last August, Motley Fool Global Gains Advisor Tim Hanson -- no reckless China basher, to be sure -- suggested avoiding Deer because China could not remain a low-cost manufacturing hub forever.

That was more than idle speculation. Last quarter, handbag maker Coach (NYSE: COH  ) said it was going to start looking elsewhere in Asia, such as in Vietnam, for cheap labor to produce its luxury handbags.

Creeping doubt already abounds on CAPS, where a little less than a third of those rating Deer Consumer Products think it can beat the market. Let us know on the Deer Consumer Products CAPS page if it will remain caught like a deer in the headlights from this latest drubbing.

Cracks in the foundation
You'd think, after AT&T (NYSE: T  ) announced it wanted to buy T-Mobile in a huge $39 billion telecom megamerger, Sprint Nextel would find itself moving higher on speculation Verizon (NYSE: VZ  ) might want to acquire it. The problem is, many thought Sprint itself would be able to pry T-Mobile from Deutsche Telekom's hands. With that scenario apparently precluded, analysts say there are few options for Sprint to grow, and even if it picked up MetroPCS (NYSE: PCS  ) or Leap Wireless, it's still going to be an ineffective third-place entry. But look for it to acquire the remaining portion of Clearwire it doesn't already own.

CAPS member ravens9111 thinks there's still plenty of opportunity to profit from Sprint if it's played right:

Getting crushed today because of ATT and T Mobile deal. Good entry point. Should bounce back after today's beating. Might be getting in a day or two early but risk/reward is good. Set tight stop/loss in live account.

Can the T-Mobile deal pass regulatory scrutiny? If it doesn't, Sprint may come roaring back. Let us know your thoughts in the comments section below or on the Sprint-Nextel CAPS page.

Tanking on dilution
Second-seeded oil tanker fleet operator General Maritime recently found itself in the unenviable position of having to sell off part of its fleet (and leasing the ships back) to pay down its debt load. Well, it's apparently been so busy restructuring itself and planning for a big, dilutive share offering that it didn't have time to file its annual paperwork with the SEC. The selloff in the stock continued yesterday.

Wall Street and the CAPS community remain bullish about the tanker company despite its troubles, and Teacherman1 recently suggested it can surmount the obstacles because of continuing global dependence on oil:

This is near their 52 week low, so I am comfortable with holding it for a while, instead of "trading" it. Oil will need to be shipped, and that's what they do. More upside than downside from here.

If it floats your boat, add the stock to the Fool's portfolio tracker to keep an eye on its progress -- or to watch management go down with the ship.

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.

Coach is a Motley Fool Stock Advisor selection. The Fool owns shares of Coach. 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 (2) | Recommend This Article (4)

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 March 22, 2011, at 2:47 PM, geoflying wrote:

    Right, the same bs, hold it while it drops on hopes of it going up, typical market advice.

  • Report this Comment On March 22, 2011, at 7:23 PM, jimgetsrich wrote:

    Regarding Deer:

    I read the article on Deer written by someone named Alfred Little. The article did far more than just question the high price Deer may have paid for a piece of property. It raised serious questions about whether Deer's phenomenal growth and profit margins are fraudulent. That is why the stock tanked. The article was persuasive.

    However, Deer immediately fought back, saying it could find no record of an Alfred Little. They are saying he's making everything up as part of a short-sell strategy that clearly has worked.

    So it comes down to this: If Little is real, Deer is a fraud basically worth little. If Little is a crook, then Deer is a fantastic bargain right now.

    Which is it? I have no clue.

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