Why Did My Stock Just Die?

Hoping beyond hope the EU's finance ministers really, really mean it this time when they say they'll do more to fix their financial houses, the markets rallied higher. While your stock went and took a nosedive, 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

Gentiva Health Services (Nasdaq: GTIV  ) **** (17.9%)
Richmont Mines (NYSE: RIC  ) **** (17.7%)
PharMerica (NYSE: PMC  ) *** (15.2%)

With the Dow Jones Industrial Average (INDEX: ^DJI) jumping 153 points on Tuesday, or 1.4%, stocks that went down are pretty big deals.

We're sick of it!
With the Justice Department investigating the billing practices of Amedisys  (Nasdaq: AMED  ) , and the Securities and Exchange Commission probing the home health services industry, it's difficult to muster much enthusiasm for Amedisys, Almost Family (Nasdaq: AFAM  ) , or LHC Group. Analysts think the industry is in for a round of steeper-than-expected Medicare reimbursement cuts and have downgraded everyone in the space.

So it probably shouldn't have been much of a surprise when a Senate finance panel alleged that Amedisys, Gentiva Health Services, and LHC all provided medically unnecessary patient care. Gentiva, though, was hardest hit by the allegations, losing nearly half its value over the past few days.

For a political system driven to try to wring cost savings out of health care, hospital care provides an easy target much as the insurance industry did during the contentious health-care reform debates. Gentiva maintains the committee took its operating metrics out of context and twisted them for its own purposes. I would have guessed "political gain," but Gentiva has a point that having metrics for all key operating indicators is in line with its fiduciary responsibility and not merely a means to drive profits.

As cheap as Gentiva looks here, with the powerful forces lined up against it and no one really speaking up in its defense, it's hard to recommend the stock. But give us your views on the Gentiva CAPS page on whether it's being used as a political strawman, and be notified of developments by adding the stock to your watchlist.

The cost of health care also rocked nursing-home pharmacy provider PharMedica, as the Centers for Medicare and Medicaid Services said nursing homes ought to hire independent pharmacists to review residents' drug regimens rather than relying on PharMedica or Omnicare for the service. It also noted that just three companies control 90% of the long-term care pharmacy market, which many took to mean it will cast the stink-eye on Omnicare's proposed acquisition of PharMedica.

Omnicare is still proceeding with its hostile tender offer, and extended until Dec. 2 the deadline for shareholders to acquiesce.

With 95% of CAPS members rating PharMedica to outperform the broad indexes, whether it remains a standalone company doesn't seem to weigh too heavily on their outlook. Add the pharmacy specialist to the Fool's free portfolio tracker and see whether regulators or rivals ultimately do it in.

Goldfinger
After reaching record highs of more than $1,900 an ounce, gold prices fell off a cliff, dropping to $1,550 an ounce in less than a month. The gold-as-safe haven-investment has come up against the wall of investors looking to cover losses elsewhere by selling the precious metal. Yet the fundamental impetus serving as the foundation of gold bugs' enthusiasm remains intact, as Europe's sovereign nations lurch from one crisis to another, stamping out fires of calamity as they arise.

Junior gold miner Richmont Mines feels the pressure of falling gold prices, but was also punished yesterday after analysts at National Bank downgraded the stock. Richmont still has high cash costs per ounce, and it expects them to remain elevated as the company pursues methods of extracting gold more efficiently.

Total cash cost per ounce produced at its Beaufort mine fell almost 26% to $782 in the second quarter, down from $1,052 in the year-ago quarter, while the Island gold mine saw cash costs drop 8%, leading to an overall drop of 14% and an average of $786 per ounce produced. That's still quite a bit higher than AuRico Gold's (NYSE: AUQ  ) estimated cash costs of $445 to $475 per ounce. Richmont's moving in the right direction, but it has a sizeable gap to make up.

CAPS member Timoteo57 admits the miner is volatile but sees plenty of good things, too.

Fundamentally sound company with a low price in a lucrative, consistently high performing sector (gld/slvr). Little debt with earnings growth consistently beating or meeting analyst estimates. Very little widely publicized negative information that I am aware of and most consider this stock a winner and so far YTD, it has been behaving accordingly.

Add Richmont to your watchlist, and check the opinions of others on the Richmont Mines 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.

Fool contributor Rich Duprey holds no position in any company mentioned. Check out his holdings and a short bio to see his holdings and a short bio. The Motley Fool owns shares of Almost Family. 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 (1) | Recommend This Article (3)

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 October 19, 2011, at 1:47 PM, zulo1989 wrote:

    I own a home health care company. The findings here are correct. The current punitive environment for home health is very precarious. With the upcoming cuts in medicare reimbursement, increased regulations coupled with the hospitals pressuring their doctors and discharge planners to use their own home care. I don't really know how this big companies can survive. Unless of course they open up their own hospitals. The new health regulations are designed for further consolidation and monopolistic practice e.g. creation of accountable care organizations.

Add your comment.

DocumentId: 1565067, ~/Articles/ArticleHandler.aspx, 7/25/2014 12:07:04 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement