The Market Just Crushed My Stock!

The market cobbled together another up day yesterday as it takes in Italy's plan for restructuring, but even though your stock 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

Geron (Nasdaq: GERN  ) *** (20.5%)
AMR (NYSE: AMR  ) * (10.3%)
A123 Systems (Nasdaq: AONE  ) *** (9.3%)

With the markets managing to stay in positive territory yesterday, stocks that went down by even larger percentages are pretty big deals.

That's going to leave a mark
Is this just a case of less is more? Stem cell researcher Geron announced that it was giving up on ... stem cells! But it's not as though the biotech is going out of business, since it did have a whole other half that focused on oncology therapies and it will be pouring its resources into that focused niche.

While stem cell research holds a lot of promise, there are some big hurdles in front of it that Cytori Therapeutics (Nasdaq: CYTX  ) , Pluristem Therapeutics (Nasdaq: PSTI  ) , and others are trying to climb. Geron had the added obstacle of using human embryonic stem cells in its research, which all by itself created a distraction by those protesting their usage.

As a result of the decision, Geron is slashing more than a third of its workforce and expects to incur charges of $5 million in the fourth quarter and $3 million in the first half of 2012, though it will end the year with more than $150 million in the bank. It should recoup some of those expenditures because it is seeking partners for the assets it's axing. It's going to need all that money and its cash hoard to fund its oncology trials.

With 92% of the 682 CAPS members rating Geron thinking it will beat the market, I'm sure they'll have to reevaluate their position after yesterday's bombshell. I'd like to hear what you have to say in the comments section below or on the Geron CAPS page. Add the stock to your watchlist to see how the more focused company performs.

A tarnished outcome
The pilots union at American Airlines parent AMR is walking a fine line in contract negotiations. It's trying to get the best deal and protection for its pilots while ensuring the airline isn't pushed into bankruptcy. The hosing United Continental's (NYSE: UAL  ) pilots got a few years ago when United Airlines declared bankruptcy is undoubtedly still fresh in their minds. Pilots saw promised pay and benefits slashed while the company's CEO Glenn Tilton was lavished with $20 million in new company stock.

No doubt the pilots see the writing on the wall, though, since last month they started filing their retirement papers in ever larger numbers. They might suspect with American's latest lowball offer that it wants to default on its pension obligations like United did and foist its responsibility onto the backs of taxpayers. United was able to emerge a cleaner company, giving it a competitive advantage over American, which was one of the only airlines that didn't go bankrupt.

It's similar to General Motors getting a taxpayer bailout and breaking the bondholders that should have been first in line to be paid. It's now a leaner company that doesn't have the same legacy costs that Ford (NYSE: F  ) does, giving it an edge over the carmaker that chose not to reach into the taxpayer's wallet.

I'm not exactly a fan of unions, but I'm even less enamored of rich executives and their companies using the taxpayer as a negotiation backstop. That could also be why more than half the CAPS All-Stars rating AMR think it won't outperform the broad indexes and why members like modestfool13 think a bankruptcy filing is in the cards.

Add AMR to your watchlist to be notified of all the latest developments and how the negotiations pan out.

Going flat
Electric cars are already having a difficult enough time generating consumer demand that the industry doesn't need the negative publicity the battery fire in GM's Chevy Volt charged up. Three weeks after a safety crash was performed, a Volt's battery ignited and the NHTSA is investigating.

A123 Systems isn't the manufacturer of that battery -- Korea's LG Chem is -- but it's a black smudge nonetheless on the niche. The battery maker is already suffering from problems at Fisker, which originally planned to produce as many as 7,000 all-electric sports cars this year featuring A123's batteries, but now says it will likely have just 1,500 roll off the assembly line. Even assurances that it will produce 15,000 next year can't bolster the battery maker's fortunes. The electric car may soon be drained.

CAPS member MajorBob04 doesn't see A123 Systems electrifying investors any time soon: "It's not clear that this technology will be the technology for the future, thus costs will probably far outweigh revenue until the company goes bankrupt, or is bought out (if ever)."

Add A123 to the Fool's free portfolio tracker, then tell us on the A123 Systems CAPS page if the EV market can get its motors running.

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. With CAPS, you can decide for yourself whether your stock is 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 Ford Motor. Motley Fool newsletter services have recommended buying shares of Ford Motor and General Motors. 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.


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