Why Did My Stock Just Die?

Why anyone thought Europe was out of the woods is beyond me, but Germany having a difficult time selling its bonds renewed fears of financial collapse again. Yet 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)

Wednesday's Change

Diamond Foods (Nasdaq: DMND  )

**

(20.5%)

Groupon (Nasdaq: GRPN  )

*

(15.5%)

InterOil (NYSE: IOC  )

*

(14.4%)

With the markets falling 236 points on Wednesday, or 2.1%, stocks that went down by even larger percentages are pretty big deals.

That's going to leave a mark
Hard to believe that a director's death would cause Diamond Foods shares to lose a fifth of their value, but the snack food maker was forced to announce that the suicide of their director Joseph Silveira had no bearing on an investigation into payments made to walnut growers last year.

That's significant because Diamond is trying to buy the Pringles brand from Procter & Gamble (NYSE: PG  ) in a $2.35 billion deal that, while a seemingly good fit for the snack maker -- Diamond would rank up there with PepsiCo's (NYSE: PEP  ) Frito Lay and Kraft's (NYSE: KFT  ) coming snack food spinoff -- would also require P&G shareholders to accept some Diamond shares in exchange for their typically sturdy P&G stock. With Diamond's shares now trading some 70% lower than they were just two months ago, it may make the deal harder to close.

Diamond initially disclosed its audit committee was looking into a $50 million payment to walnut growers the company made in September for walnuts purchased last fiscal year. Had that payment been included in Diamond's financial statements then, it would have cut the snack maker's operating income by more than half. So Silveira's suicide occurring in the wake of these disclosures has a more sinister overtone, particularly since he recused himself from the investigation.

Skittish P&G shareholders may be even more reluctant to accept Diamond shares now, even if nothing untoward is found between Silveira's death, the so-called "momentum payments" it made it walnut growers, and Diamond's accounting.

While the CAPS community has been generally supportive of Diamond Foods, opinion has turned decidedly negative in the wake of the most recent disclosures, and its two-star rating suggests they thought there were better places for your money to begin with. Let us know in the comments section below what you think of the situation, then add the snack maker to your watchlist to see where the investigation leads.

Piling on
It didn't take long for the wheels to come off the IPO of daily dealmaker Groupon. Shares that opened at $20 on its first trading day as a public company quickly shot up to $28 but have now fallen through the IPO price and trade at less than $17. Even after Groupon was forced to restate earnings before its debut because of fuzzy math accounting, the offering was oversubscribed. Seems like it was only a matter of time before investors would be getting off the Groupon train, and that time is now likely upon us.

Leaving aside the highly competitive local advertising space represented by Reach Local (Nasdaq: RLOC  ) and Local.com, you have both Google and Amazon.com getting in on the game. When even your local daily news rag can offer you local deals, where is the competitive moat for Groupon to survive, let alone thrive?

Even after this steep drop in price, I've gone and marked Groupon to further underperform the broad indexes, joining the vast majority of CAPS members already rating the daily deals site to lose to the market. How about you? Has the stock fallen far enough, or is there still more room below? Tell us on the Groupon CAPS page if you think they'll bounce back from here, and follow their progress by adding them to the Fool's free portfolio tracker.

A dry well
There didn't seem to be specific news to account for InterOil's decline the other day, but the national newspaper of tiny Papua New Guinea where the oil and gas company is trying to build a liquid natural gas facility did run an article reiterating the uphill climb the project is now facing. It says despite management's assurances to the contrary, InterOil would not be able to begin building the plant without first getting its license. And with the proposal not in line with the agreement originally laid out, it seems doubtful it will get anywhere.

Not many investors think InterOil will be gaining traction any time soon, either. Just 45% of the CAPS members rating it think it can beat the Street, and a little more than a quarter of the All-Stars agree. Yet one All-Star marc64 admitted it was a speculative bid to lean in favor of the company:

This looks like a pretty interesting, long term speculative call. Asia, energy, development, great reserves.

Add the LNG hopeful to your watchlist and see if it can persuade PNG's government to give it the green light it's seeking.

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 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 and PepsiCo. Motley Fool newsletter services have recommended buying shares of ReachLocal, Google, PepsiCo, Amazon.com, and Procter & Gamble. Motley Fool newsletter services have recommended creating a diagonal call position in PepsiCo. 

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.


Read/Post Comments (2) | Recommend This Article (3)

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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 November 25, 2011, at 12:43 PM, KnowYourFacts wrote:

    PNG Prime Minister O'Neill witnessed and supported Interoil at an event to announce a Heads of Agreement between Interoil and the third largest global energy trader, Gunvor, to supply 1 million tonnes per annum of LNG over a 15 year period.

    This action speaks volumes compare to a negatively motivated local article.

    http://www.prnewswire.com/news-releases/interoil-and-gunvor-...

    InterOil and Gunvor Sign Heads of Agreement for LNG Supply

    PORT MORESBY, Papua New Guinea and HOUSTON, Nov. 25, 2011 /PRNewswire/ -- InterOil Corporation (NYSE: IOC) ("InterOil") and Pacific LNG Operations Ltd. ("Pacific LNG") announced the signing of a Heads of Agreement (HOA) with Gunvor Singapore Pte. Ltd., for the supply of one million tonnes per annum (mtpa) of liquefied natural gas (LNG) from the Gulf LNG Project in Papua New Guinea. The signing occurred in Port Moresby and was witnessed and supported by Prime Minister Peter O'Neill, the Gulf Governor Havila Kavo, and other cabinet Ministers.

    The Prime Minister witnessed the signing of the HOA and acknowledged that the PNG Government supports the phased LNG development of the Gulf LNG project and the financial structure to ensure LNG revenue for all stakeholders by 2014 to early 2015.

    Mr. Philip Fjeld, CEO of FLEX LNG LTD, was present to assure the PNG government that FLEX LNG and Samsung can be ready for FID by Year end 2011, in line with the PNG government requests.

    The Gulf LNG Project in Papua New Guinea (PNG) comprises the Elk and Antelope gas fields and the planned liquefaction and associated facilities in the Gulf Province of PNG to be developed by Liquid Niugini Gas Ltd., InterOil and Pacific LNG's joint-venture project company.

    The HOA, while not binding, sets out the basis upon which the parties intend to negotiate and document terms for the purchase and sale of one mtpa of LNG, for a period of 15 years commencing in 2015, to be supplied by the proposed Gulf LNG Project in PNG. InterOil and Pacific LNG are striving to complete negotiations and execute a binding Sales and Purchase Agreement (SPA) with Gunvor by the second quarter of 2012.

    InterOil Chief Executive Officer Phil Mulacek commented, "We are pleased to have executed an HOA with Gunvor, for long-term LNG off-take from our Gulf LNG Project in Papua New Guinea. InterOil is proud to work with Gunvor, one of the largest energy commodity movers in the world. With 2.3 mtpa now committed under HOA's, InterOil has preliminary LNG offtake arrangements for more than 50% of its start-up LNG volumes. We expect the HOAs to facilitate remaining infrastructure financing arrangements with binding SPA, driving robust debt coverage for the Gulf LNG project."

    Liquid Niugini Gas V.P. LNG, Conrad Kerr, commented, "Gunvor has become an established player in the LNG industry through its success in acquiring, and moving large amounts of short-term LNG cargoes in the last few years. We are interested in value optimization for our LNG, and a long-term relationship with Gunvor enhances this strategy."

    About InterOil

    InterOil Corporation is developing a vertically integrated energy business whose primary focus is Papua New Guinea and the surrounding region. InterOil's assets consist of petroleum licenses covering about 3.9 million acres, an oil refinery, and retail and commercial distribution facilities, all located in Papua New Guinea. In addition, InterOil is a shareholder in a joint venture established to construct liquefaction facilities in Papua New Guinea.

    InterOil's common shares trade on the NYSE in US dollars.

    About Gunvor Group

    Gunvor Group is the world's third largest independent oil trading company by turnover, with trading conducted from offices in Geneva, Singapore and Nassau, Bahamas. Gunvor Group trading partners and clients include eight out of the top ten, and seventeen out of the top twenty of the world's largest oil and energy companies. In addition to its traditional trading business in crude oil and oil products, Gunvor Group also trades a broad range of other energy commodities including coal, gas, LNG, and emissions. The ownership, operations and management of physical assets demonstrate a long-term commitment to the business.

    About Pacific LNG

    Pacific LNG is an affiliate of Clarion Finanz A.G., a private company specialized in energy and mining investments. Pacific LNG owns an economic interest of approximately 20% in the Elk Antelope fields, 47.5 % of Liquid Niugini Gas and is a large shareholder of InterOil.

    Investor Contacts for InterOil

    Wayne Andrews

    Meg LaSalle

    V. P. Capital Markets

    Investor Relations Coordinator

    Wayne.Andrews@InterOil.com

    Meg.LaSalle@InterOil.com

    The Woodlands, TX USA

    The Woodlands, TX USA

    Phone: +1 281-292-1800

    Phone: +1 281-292-1800

  • Report this Comment On November 26, 2011, at 8:42 AM, jhedy wrote:

    im very strong on Diamond Foods

    at these prices i bought more on thur. and fri.

Add your comment.

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