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)

Wednesday's Change

Stratasys (Nasdaq: SSYS  )

****

(26.0%)

Juniper Networks (NYSE: JNPR  )

**

(20.9%)

Flagstar Bancorp (NYSE: FBC  )

**

(17.6%)

The clock is ticking down to the debt ceiling deadline, and with each side playing a dangerous game of brinkmanship, the Dow tumbled 198 points yesterday, or 1.6%. So stocks that went down by even larger percentages are pretty big deals.

You can't print money
You have to admit that the concept of 3-D printing systems is kind of cool. Printing out an actual object rather than a two-dimensional sheet of paper conjures up all kinds of things we might want to make copies of. Unfortunately for leading 3-D printer Stratasys, its earnings report was even flatter than that, as revenues widely missed expectations despite a beat on profits.

Selling printers that can cost tens of thousands of dollars can present problems in tough economic times, but even rival 3-D Systems, which is trying to make a consumer line of 3-D printers, fell in sympathy with Stratasys -- and with its own earnings due out today, 3-D may end up dropping a whole lot more.

Yet Stratasys had some high points standing out in stark relief, like the renewal of an agreement with Hewlett-Packard (NYSE: HPQ  ) to sell branded printers and expand in Europe.

Considering that the business is still quite profitable, the CAPS community is thinking the drop in value was overdone. All-Stars such as chty18 and colddrink73 think the overreaction represents a good place to look for a rebound.

Let us know on the Stratasys CAPS page or in the comments section below whether you think an investment in 3-D printing systems will be like printing money.

Networking your way to losses
Economic fears are even more pronounced in the networking equipment market than in an esoteric niche like 3-D printing systems. Juniper Networks seemed to echo the concerns Cisco (Nasdaq: CSCO  ) raised recently when it said businesses are delaying expenditures because of the uncertainty surrounding the economy. Not only did its second-quarter results come in below its own guidance, but its forecasts for the coming quarters were particularly dour.

Both AT&T and Verizon have said they'll be spending less in the back half of 2011 than they normally would, which is a big concern to equipment makers since the carriers typically spend more than they do in the first half. Thus, the lower spending will be magnified for Cisco, F5 Networks, and JDS Uniphase (Nasdaq: JDSU  ) . Both F5 and Riverbed Technology (Nasdaq: RVBD  )  saw their shares tumble recently after revenues came up short.

CAPS member diamondmickey had hoped that new contracts Juniper signed would be enough to turn things around, but he still sees it as sufficiently capitalized to weather any storms: "The company is adequately solvent both in the short and long term. It has seen a steady increase in assets for the past 4 quarters and a decline in liabilities between last quarter and this and has more than enough cash to pay off its long term debt outright."

Equip yourself with greater insights by checking out the Juniper Networks CAPS page and by adding the stock to Fool's free portfolio tracker.

Bank error not in your favor
Investors also deposited Flagstar Bancorp in the discount bin after earnings were overdrawn, but the announced sale of 27 branches to PNC Financial (NYSE: PNC  ) ought to let it focus on its major markets and turn itself around. Still, nonperforming loans continue to hamper Flagstar's efforts.

Though allowances for loan losses account for a smaller percentage of loans held for investment (and of its non-performing loans), it's actually a larger dollar amount than it was a year ago. So the bank has sold off a bunch of loans, but it's already counting on the ones that are left to be less troublesome.

Wall Street was of the unanimous opinion that Flagstar would beat the indexes, but CAPS All-Star members were a bit more circumspect in their appraisal, with only 60% thinking it could do so. You can follow along on its development by adding it to your watchlist and depositing your thoughts on the Flagstar Bancorp CAPS page.

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 3D Systems and Cisco and has created a bull call spread position on Cisco. Motley Fool newsletter services have recommended buying shares of Stratasys, AT&T, Riverbed Technology, and Cisco, as well as shorting Juniper Networks. 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 Cisco 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.


Read/Post Comments (6) | Recommend This Article (8)

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 July 28, 2011, at 6:00 PM, chty18 wrote:

    my caps user name is listed! oh yea!!

  • Report this Comment On July 28, 2011, at 6:30 PM, trip70 wrote:

    I notice FBC has a large # if shares purchased by insiders. Is there anything to this?

  • Report this Comment On July 29, 2011, at 9:39 AM, jimmy4040 wrote:

    I'm wondering if there is an organized shorting campaign against RB picks. VPRT got cut down in cold blood in the middle of a crowded street this morning, like so many others. That brings to about 7 or 8 the number of RB picks that have experienced losses of 20-30% in a day or two this year. It seems more than disinterested judgment of indpendent market analysis.

  • Report this Comment On July 30, 2011, at 8:36 AM, TMFCop wrote:

    trip70,

    Some of the insider transactions are actually grants of stock made to them by the company as part of their base salary.

    For example, EVP Rinaldi was granted two tranches of shares on 7/22, 9,200 shares in one bloc, 3,800 in the other. The first tranche had a cost basis of $0 since it was his base salary. The second went for the day's closing price of $1.25.

    Now there's something to be said for executives who are willing to be paid in stock rather than cash, but It's still not quite the same as insiders making an open market purchase of the stock.

    Rich

  • Report this Comment On July 30, 2011, at 8:46 AM, TMFCop wrote:

    jimmy4040,

    I think it's more a case of Rule Breaker stocks simply being more volatile investments. It's the nature of RB investing: you're going to see some dramatic drops in value, but also some equally if not more dramatic gains at time too.

    The 3D printing market isn't exactly as staid as ink jets or laser printers so when earnings come out like they did for SSYS, in a market as jumpy as the one we're in, it's not surprising to see shares tumble. Heck, even Sprint had a big gap lower the other day and it's a more steady business than 3D printing.

    Of course I'm not one to buy into conspiracy theories either. I don't think there's this shady netherworld where people are conspiring to take down companies. Does it happen on occasion? Sure! But in general,I think you'll find stocks are typically valued based upon the business. You'll get anomalies at times -- that's why we invest! -- but in general, for good or bad, value tends to follow performance.

    Rich

  • Report this Comment On August 05, 2011, at 5:18 PM, RATBSTD wrote:

    i am starting to think jimmy4040 is on to something....

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