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

China Biotics (Nasdaq: CHBT  )

***

(20.8%)

Delta Petroleum (Nasdaq: DPTR  )

**

(10.5%)

PharmAthene (NYSE: PIP  )

****

(10.5%)

The economic data released last week confirmed what many people already knew: The economy remains in a dire condition. The markets fell more than 97 points, or almost 1%, as fewer jobs are being created and unemployment is ticking higher again, although the service sector is showing some strength. So stocks that went down by even larger percentages are pretty big deals.

The devil's in the details
How long do you have to wait to realize value? Investors in Delta Petroleum have been waiting a long time for the market to see the value its wells hold. The oil and gas driller is trading at pennies on the dollar because of overriding concerns about the large debt nut it has to crack on its balance sheet. Non-core asset sales, such as rigs belonging to its DHS joint venture with Chesapeake Energy (NYSE: CHK  ) and certain non-operated properties in Texas, where the proceeds will be used to fund additional drilling elsewhere, are definitely part of the plan.

Natural gas remains an attractive play, however. Exxon Mobil (NYSE: XOM  ) just bought natural-gas assets from two closely held companies, and last year it became the largest producer after it bought XTO Energy.

CAPS member BlacknGold recognizes the debt issue but thinks management will be able to maneuver to cover that worry.

Its market cap is $158.5 mln while its book value is ~$484 mln. DPTR does have a debt problem, but their properties are steadily increasing production. Energy prices are only going to rise. If they can sell some assets and/or pay down its debt, then there's no reason to believe it won't correct itself to meet its book valuation.

Keep an eye on Delta's future by adding its stock to the Fool's free portfolio tracker, where all the news and analysis are brought together in one place.

Anti-biotics
It wasn't a good week for China Biotics, as the stock lost 37% of its value. The biotech has been the subject of allegations of fraud that have been directed at numerous Chinese reverse-merger stocks, but it most recently tumbled after an article questioned the company's staffing and sales claims and continued its fall on Friday ahead of earnings that are due sometime this month. Although there was no specific news shaking out China Biotics investors, a number of Chinese stocks fell sharply, including gamer The9, which fell more than 9%, and solar shop ReneSola (NYSE: SOL  ) , which was off 7%.

I was late to the biotics story on CAPS, but I believed it still had more room to fall after last week's initial drop and marked it to underperform further. With more than half the All-Stars marking it down as well, I have some good company, but you can let us know your opinion on the China Biotics CAPS page or in the comments section below.

A cloudy forecast
PharmAthene remains engaged in a long-running legal battle with antiviral maker SIGA Technologies (Nasdaq: SIGA  ) in a game of tit-for-tat over a licensing agreement that fell apart when SIGA sought to buy the biotech and then backed out. The company caused angst among investors last week after announcing a dilutive $6.5 million share offering.

The biotech saw revenues double last quarter as government funding of its SparVax and Valortim biodefense programs increased, leading to a significant narrowing of its losses. The lawsuit with SIGA goes on, but so does the rest of PharmAthene's business.

The biodefense company is flying relatively low on Wall Street and Main Street, where less than 100 CAPS members have weighed in on its prospects. Shares have more than doubled over the past year but have given back about 15% over the past week.

Do you think PharmAthene can successfully complete development of its anthrax vaccine program as well as prevail against SIGA? Let us know in the comments section below, and add its stock to the Fool's free portfolio tracker.

Ready for a resurrection
Just because your stock has taken a beating, that 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 just react to the market's lead. You can decide for yourself whether it's ready to come back from the dead.

Motley Fool newsletter services have recommended buying shares of Chesapeake Energy. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Rich Duprey has no financial position in any of the stocks mentioned in the article. You can see his holdings. The Motley Fool has a disclosure policy.


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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 June 14, 2011, at 12:27 PM, georgey2 wrote:

    PIP will most likely win the law suit with SIGA and/or be bought buy them when SIGA s Perlman (ceo) sees the light.

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