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)

Tuesday's Change

A-Power Energy Generation Systems (Nasdaq: APWR  )

***

(99.9%)

Anooraq Resources (NYSE: ANO  )

***

(11.1%)

Bitauto (Nasdaq: BITA  )

*

(9.5%)

Believing Greece will approve the necessary austerity measures for a European Union bailout, the markets continued rising, jumping another 145 points, or 1.2%. Yet there is rioting in the streets of Athens, and the situation remains precarious, so stocks that went down by even larger percentages are pretty big deals.

The devil's in the details
Don't say you were warned. Last month, I noted that Andrew Left of Citron Research was warning investors that a number of Chinese stocks would crash into the wall of reality that is their financial audit. They would have to post results by the end of June, and Left surmised that many would not be able to make it across by the deadline. To say he was right is an understatement.

Trading in A-Power Energy Generation Systems was halted Monday after the close because its auditor resigned. The company wouldn't hire a forensic accountant as recommended to investigate some shady-looking transactions that have dogged the wind-power specialist for a while, and the accountant wouldn't sign off on the financials. The Nasdaq exchange suspended trading as a result.

Yet A-Power joins an ever-growing list of stocks that have been suspended because of audit issues, including China-Biotics, Longtop Financial, and Wonder Auto Technology.

The maker of wind-power components was already reeling from a number of calamities of its own making, including declining sales, the severance of an agreement with General Electric, and the postponement of its earnings conference call. The auditor issue now makes clear why, and it brings into question the viability of the wind-farm project in Texas it was able to get approved with the help of Sen. Harry Reid, or the manufacturing plant A-Power was purportedly going to build in Reid's home state of Nevada with help from Department of Energy funding.

A-Power had been an investor favorite on CAPS, despite its middling three-star rating, with 96% of the 1,122 members believing it would outperform the broad market averages. Now with trading suspended, let us know in the comments section below whether it can overcome this blow or whether it'll be doomed to a prolonged existence on the Pink Sheets alongside RINO International, China MediaExpress, and Fuqi International.

A new platinum card
Things haven't gone well for Anooraq Resources since it bought a platinum mine from Anglo Platinum two years ago, and it's looking to refinance the debt and restructure itself. It had to replace 80% of management last year at the Bokoni mine in South Africa, and it swapped out half the middle managers -- but that wasn't enough to improve operations.

Last month it cautioned investors that its stock could be materially affected by the negotiations. Yesterday it reiterated that view, and investors obviously took the company at its word.

Platinum could be in for a contentious period, and that could spell opportunity for Stillwater Mining (NYSE: SWC  ) and North American Palladium (NYSE: PAL  ) . South Africa and Zimbabwe account for 80% of the world's platinum group metals, and the former is talking about nationalizing the resources there while the latter is proposing to require that more than half of the investments there be owned by the people. If either of those things comes to pass, Stillwater could find its Montana mines even more valuable. It is the largest PMG miner outside South Africa or Russia; NAP is Canada's largest palladium miner, supported by platinum, nickel, gold, and copper.

CAPS member secretbonus says Anooraq is going to have to perform some special magic if it's going to survive.

negative EPS, current ratio of .5 (not enough current assets to pay for liabilities) and negative book value. In other words, the company is insolvent unless it pulls a rabbit out of the hat. Of course with exploration companies and companies that can raise money this is a possibility.

Mine the opinions on the Anooraq Resources CAPS page, and let us know whether you think the company can make its financial troubles disappear.

No rising tide
There's no question that China's auto market could be the solution to U.S. carmakers' troubles. General Motors and Ford (NYSE: F  ) are both counting on the country to boost sales, and China's nascent auto industry is hoping to ramp up growth, too. Providing car shoppers with information on the vehicles they want to purchase ought to be a successful business, and Bitauto is teaming up with Chinese search engine Baidu (Nasdaq: BIDU  ) to do just that.

It provides auto-related content, including listings, pictures, reviews, and dealer information to enhance Baidu's static search results. Earlier this year, CAPS member nightsinbear was looking for a way to capitalize on China's auto industry: "Bita [may be] the best way to play the growing Chinese auto market so you should take a [shot] at it. Also it's at the bottom of its range so [you] have great upside."

Unfortunately, Bitauto is also saddled with a heavy debt load. It trades for less than half the peak it reached out of the IPO gate. Add Bitauto to the Fool's free portfolio tracker and see whether it can rev its engine again.

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.

The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of Ford, Baidu, and General Motors. 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 owns shares of North American Palladium but has no financial position in any of the other stocks mentioned in the article. You can see his holdings. The Motley Fool has a disclosure policy.


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