Why Did My Stock Just Die?

The markets are putting together back-to-back days of stronger gains, but your stock is still taking a nosedive. Don't panic, though. First, let's see whether it had good reason to fall. Sometimes, panic-fueled drops can make excellent buying opportunities. Here are the latest crop of cratered stocks that could provide a possibility for profit:

Stock

CAPS Rating
(out of 5)

Monday's Change

Giant Interactive Group (NYSE: GA  ) *** (8.2%)
VASCO Data Security (Nasdaq: VDSI  ) ***** (6.1%)
eLong (Nasdaq: LONG  ) * (5.3%)

With the markets jumping 254 points yesterday, or 2.3%, it seems that it was mostly ETFs betting against the market that were dropping. So stocks that also went down are pretty big deals.

The devil's in the details
Could Chinese online game maker Giant Interactive Group have avoided its loss simply by being a little more forthcoming about its special dividend?

Giant owns the massively popular ZT Online franchise, a "free to play, pay to play more" MMORPG. After its earnings report, it agreed to pay shareholders of record on Aug. 31 a $3-per-share special dividend, payable Sept. 9. Typically, that would mean yesterday was the ex-dividend date, and traders seemed to be trying to get out of the stock before the close of business.

However, stock exchange rules also require that when a dividend is equal to 25% or more of the stock's trading price, the ex-dividend date then falls on the first day after the dividend is paid, or Sept. 12! This deferred ex-dividend date (called the "due bill period") allows the record keeping to catch up with shareholders not entitled to receive the dividend. Giant, trading at around $8 a share, falls into this niche, but unfortunately seems never to have taken the time to explain this to its shareholders.

That could be good for investors wanting to get in. The F2P-RTM model is attractive to many gaming companies, including Activision Blizzard (Nasdaq: ATVI  ) and NetEase.com (Nasdaq: NTES  ) . Giant should be able to regain its footing and the new lower price -- lower than it would be without the dividend -- could be a good entry point.

The appeal of the business model could explain why all but two of the CAPS All-Stars rating Giant think it will outperform the broad market averages. Let us know on the Giant Interactive Group CAPS page whether you think it's trying to game the system.

Off the market
When you operate in the security field, your reputation for integrity is paramount. So it's not good for business that a VASCO Data Security subsidiary apparently issued a digital certificate to an entity fraudulently claiming to be Google (Nasdaq: GOOG  ) . According to Google, "The people affected were primarily located in Iran."

A person who says he is in Iran sounded the alarm by posting the red warning page that showed up when he tried to access his Gmail account. A representative of DigiNotar, the VASCO subsidiary, posted on his Facebook page that it issued a certificate to a "malicious entity" and recommended users stop trusting it until it could be determined what occurred. Google has said it will block any sites whose certificates were signed by DigiNotar while it also investigates.

Some allege the government of Iran was behind the hacking. Considering the certificate was issued back in July, that's a long time the Iranian government may have been monitoring the online activities of its citizens.

While this incident casts a shadow on the company, these types of incidents do occur. Highly rated CAPS All-Star EnigmaDude had been impressed with VASCO's beat-and-raise earnings performance. With 98% of the more than 2,100 CAPS members rating the security specialist marking it to beat the stock indexes, this dude isn't alone.

Add VASCO Data Security to the Fool's new My Watchlist feature if you think it can secure growth again.

Unsure of itself
There was no particular news to account for the fall at Chinese online travel info site eLong, and usually a drop like it experienced yesterday can be explained away because it's a small, relatively lightly traded stock. But when the market as a whole moves up 2% and industry leader Ctrip.com (Nasdaq: CTRP  ) rises 3%, you cast about looking for a reason why your stock didn't participate in the rally.

Earlier this month, eLong missed analyst estimates when it reported quarterly earnings of $0.04 a share, compared to the consensus view of $0.08 each. Yet even Ctrip disappointed the market, reporting earnings that were only inline with expectations and serving up guidance that was below Wall Street forecasts.

If nothing else, it points to an industrywide malaise rather than a company-specific problem, which means it can be fixable. Analysts are evenly split on whether the stock can beat the market, but CAPS members are more supportive, with 84% thinking it can go the distance. However, the low, one-star rating they've assigned it suggests they think there are better places for your money.

You can let us know on the eLong CAPS page whether you would travel to the ends of the Earth to buy this stock.

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 just react to the market's lead. You can decide for yourself whether it's ready to come back from the dead.

Fool contributor Rich Duprey holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Google, Ctrip.com International, and Activision Blizzard. The Fool owns shares of and has written calls on Activision Blizzard. Motley Fool newsletter services have recommended buying shares of Activision Blizzard, NetEase.com, Ctrip.com International, VASCO Data Security International, and Google. Motley Fool newsletter services have recommended creating a synthetic long position in Activision Blizzard. 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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  • Report this Comment On September 27, 2011, at 5:17 PM, Bcharmour wrote:

    Cute article. I don't know how my stock lives or dies. I am long elong but only a few shares. No updates. If Ctrip missed and Ctrip gains, why does elong only miss and dive? Not enough people trading it I guess. I'm gonna sit on it.

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