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)

Monday's Change

China New Borun (Nasdaq: BORN  )

*

(12.9%)

21 Vianet Group (Nasdaq: VNET  )

*****

(11.9%)

Rediff.com (Nasdaq: REDF  )

*

(9.5%)

Continued concerns over Europe's economic health caused stocks to tumble 130 points, or 1.1%,  yesterday. In the face of that pullback, stocks that receded by even larger percentages could be big deals.

The devil's in the details
Chinese stocks born from reverse mergers have been rocked by fraud allegations lately, leaving even those with untarnished reputations overshadowed by their allegedly less savory counterparts.  However, no one's made any allegations as of late against China New Borun, which turns feedstock into grain-based alcohol. In fact, the company recently reported stellar earnings results, with revenue surging 47% and net profits growing 38% year over year.

Still, China New Borun's had anomalies recorded in the past regarding its finances, and it had four directors abruptly resign their positions last year. The stock has fallen 65% since then, and in an increasingly jittery market for Chinese small caps, one can easily imagine that every new case of alleged fraud that surfaces elsewhere doesn't exactly help its prospects.

Some 79% of the All-Stars who have taken a stance on China New Borun don't think it can beat the market. While the one Wall Street analyst following the alcohol feedstock producer remains bullish on its prospects, even the broader CAPS community tilts negatively against it.

Tell us on the China New Borun CAPS page whether this company's born to run, or doomed to sink.

Engines seizing
21Vianet Group, a Chinese Internet data center services company, has stumbled right out of the IPO gate, with its stock falling 50% since its offering last month. Renren (Nasdaq: RENN  ) and Qihoo 360 (Nasdaq: QIHU  ) are all down by big percentages from their recent IPO prices.

While CAPS member saryamane was willing to give the company a chance as cloud computing player in a growing Chinese market -- and the 14 CAPS members rating it concur -- 21Vianet doesn't look poised to move higher, if at all, until after the earnings report it's scheduled for next week.

Although it identifies itself as the largest carrier-neutral Internet data center services provider in China based on 2009 revenues, 21Vianet relies upon China Unicom and China Telecom for its bandwidth. Yet each of those companies also provides data center services, which could pose problems for 21Vianet, should its own business grow.

You can track whether it will be able to overcome the angst gripping Chinese stocks by adding 21Vianet Group to the Fool's free portfolio tracker.

A cloudy forecast
Indian Internet portal Rediff.com continues its march downward from its recent highs, even though its reported revenues grew 24% year over year and 2% sequentially. With ComScore indicating that Rediff grew its active user base by 43% in the quarter, this site was actually growing much faster than the whole Indian Internet market itself.

That's better than the results Sify Technologies (Nasdaq: SIFY  ) achieved. The two companies have historically risen and fallen together, which may be holding Rediff back. Sify's shares were down 6.5% on their own yesterday.

While it's possible that Rediff's stock rose too far, too fast, and was due for a correction, CAPS member reemster says the demographics awaiting the company ensure that its growth will continue: "India's fast-growing economy is poised for large gains in the Internet industry as the increasing middle-class turns toward technology."

If the recent volatility is too much for you, add Rediff.com's stock to your watchlist and track its progress from there.

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 on Motley Fool CAPS at what's happened to your stock can give you an edge over other investors who merely follow to the market's lead.

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. The Motley Fool has a disclosure policy.

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.


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