Why Did My Stock Just Die?

The markets resumed their tumbling ways, but your stock went and took an even bigger 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's the latest crop of cratered stocks that could provide a possibility for profit:

Stock

CAPS Rating (out of 5)

Wednesday's Change

Vical (Nasdaq: VICL  ) *** (14.7%)
Alpha Natural Resources (NYSE: ANR  ) *** (17.2%)
James River Coal (Nasdaq: JRCC  ) *** (14.6%)

With the Dow Jones Industrial Average (INDEX: ^DJI) falling 284 points yesterday, or 2.5%, stocks that went down even more are pretty big deals.

Hanging up on growth
Usually, announcing the issuance of patents for a drug doesn't send your stock into a tailspin, but gene-based pharmaceutical products maker Vical has lost almost a quarter of its value after announcing that Canadian and Japanese authorities each issued a patent for its adjuvant Vaxfectin. Adjuvants help boost the body's immune system, so each dose requires less quantity of the vaccine.

Vical has a pipeline of promising drugs, though the one that gets the most attention is melanoma therapy Allovectin-7. It's often put in the same class as Bristol-Myers Squibb's Yervoy and Dendreon's (Nasdaq: DNDN  ) Provenge, particularly since they both command high price tags. But there's been a push back again on ridiculously high prices for drugs, as Dendreon and KV Pharmaceuticals (Nasdaq: KV-A  ) can attest.

CAPS member JuanPeter isn't impressed with the results of Allovectin-7 thus far and fears that investors will only be separated from their money in the future. Still, 93% of the CAPS members rating the drug developer think it will outperform the broad market averages. Tell us on the Vical CAPS page whether you think the market's reaction is patently absurd.

The devil's in the details
Is this where we see the emerging markets' economic engine seize? Alpha Natural Resources said shipments of metallurgical coal, which is used in steelmaking, are falling because of "unexpectedly curtailed customer activity levels" in Asia. Rather than China, Alpha is heavily tilted toward India, Brazil, Italy, Turkey, and Ukraine, as they account for 35% of annual coal revenues.

The risk to growth was highlighted when miner Rio Tinto (NYSE: RIO  ) also noted the cautious attitude of customers, saying that while its order books are full, some customers have delayed shipments. It did note that China wasn't included in the slowdown. Walter Energy (NYSE WLT) also issued a cautionary note, saying coal sales would be about the same as the 5.2 million metric tons recorded for the first half of 2011, even though it laid the blame on operational issues. Previously, it had expected to move about 5.9 million metric tons of coal, so it's reasonable to assume some of the issues are related to demand.

The CAPS coal sector in general fell more than 5% on the day yesterday, and the dour news was behind James River Coal's tumble, too.

With the markets putting Alpha in a rout, CAPS member cbwang888 thinks that makes it an opportune time to step in.

Wall Street had been unanimously bullish about Alpha's prospects, but that might change as events unfold. You can add your opinion on the Alpha Natural Resources CAPS page and let us know whether you think these reports are just a canary in the coal mine for the rest of the industry.

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.

Fool contributor Rich Duprey holds no position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Dendreon. 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. The Motley Fool has a disclosure policy.


Read/Post Comments (3) | Recommend This Article (5)

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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 September 23, 2011, at 11:16 PM, vaderblue wrote:

    Vical alive and well. $3.01 in Friday aftermarket and going higher on Monday.

  • Report this Comment On September 23, 2011, at 11:22 PM, vaderblue wrote:

    Will Ford (F) a good long play. @ 9.86. I think it will pull back some more and then buy in. Looking for more cost cutting from Ford and bigger incentives in 1st qtr 2012. I feel 2nd quarter will produce some serious capital appreciation. Shame they don't pay a dividend.

  • Report this Comment On September 24, 2011, at 3:09 AM, radicall wrote:

    Alpha is trading below book value. Earnings and cash flow are weak but book value is $37 and trading 0.32x assets

    The price counts for the head and shoulders have been met on the downside..

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