You saw the headlines. You know your stock price made a big move. But what does that portend for your investment's future?
By pairing the latest news with the collective wisdom of our 170,000-strong Motley Fool CAPS investing community, we might be able to discover whether your stock's latest exploits are a short-term hiccup -- or the start of a much bigger trend.
The following stocks have all made big moves over the past five days:
(out of 5)
Change Past Week
|Allied Irish Banks (NYSE: AIB )
|KV Pharmaceuticals (NYSE: KV-A )
|Advanced Battery Technologies (Nasdaq: ABAT )
Source: finviz.com, Motley Fool CAPS.
With the Irish government preparing to nationalize its banking system, the winners will be Allied Irish Banks and the Bank of Ireland (NYSE: IRE ) , which will be allowed to survive as legacy institutions with assets from other financial firms mixed in. However, the Bank of Ireland is trying to stave off outright government ownership and has been given until June to make up the capital it needs. The government already owns more than a third of it.
The losers in the nationalization plan are the smaller institutions like EBS Building Society and Irish Life & Permanent, a mortgage and pension provider, that will be dissolved as they're folded into the larger banks.
The government takeover underscores the belief investors had that Ireland wouldn't allow its biggest financial institutions to crash. In February, CAPS member TheSurfingFool foretold the outcome of the crisis:
[Allied Irish's] share price is well below it's book value. Believe that the Irish Government and people will not let a national bank like [Allied Irish] go under. U.S. Government ownership doesn't seem to have hurt [General Motors], so I don't think it will hurt [Allied Irish]. I expect [Allied Irish's] share price to improve as the Irish economy improves.
Add Allied Irish Banks and Bank of Ireland to your watchlist to see how these banks fare across the pond.
A short course in poor PR
The damage has already been done. With its reputation in tatters, KV Pharmaceuticals' only hope to salvage anything out of the Makena pricing debacle was to drop the price it would charge. But the price cut did little to stem the bleeding.
KV's stock plummeted after the FDA announced it wouldn't enforce the company's drug exclusivity. While the pharmaceutical said in response that it would drop the price by 55%, at $690 a dose it's still way above the $10 to $15 a dose patients were previously paying when doctors prescribed cheaper, off-the-shelf drug combinations. KV's stock dropped again.
Hologic (Nasdaq: HOLX ) , which developed the drug, took its money and ran. Once the drug got FDA approval, it turned rights to Makena over to KV and washed its hands of the matter.
KV tried to justify its $1,500 price by saying it invested more than $250 million to bring Makena to market, including more than $50 million in research and development. The negative reaction from patients, doctors, insurers, and politicians was a result of KV trying to recoup those costs very quickly.
Most of the CAPS members who have rated KV think it will rise up from this glaringly misguided affair, with 90% rating it to outperform the broad market averages. Let us know on the KV Pharmaceutical CAPS page whether this stock is doomed.
No assurance on veracity
Advanced Battery Technologies' shares are some 43% lower than they were just last week; the enormous plunge they took means the stock is still down by almost half from where it had been trading before a report alleging the company was a scam was released.
Variant View Research issued its damning report, claiming Advanced Battery's distribution partners were made up out of whole cloth, the profits it reports are impossible to make -- particularly since rivals A123 Systems (Nasdaq: AONE ) , Ener1 (Nasdaq: HEV ) , and others all report losses -- and revenues are leaping ahead even as employee rolls fall. These days, you don't need half as many accusations against a Chinese small-cap stock to have investors run for the exits.
But CAPS All-Star puccini3005 thinks all of the risk was priced into the stock and then some:
Rolling the dice on what's become a binary situation: Allegations of fraud have been made, which will either be true or false. If true, will yesterday's 42% decline be a drop in the bucket, or sufficient punishment? I suppose it depends on the depth of the lies...But if proven false, or even mostly false, I would expect a sharp rebound.
You can watch the drama play out by adding the battery maker to your watchlist and charging up the discussion on the Advanced Battery Technologies CAPS page.