Apparently like the passengers on the Titanic, investors are partying even though the eurozone could collapse within days. Sure, there may be a deal in the works, but is it the same refrain we've heard all along? 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:
CAPS Rating (out of 5)
|Ternium (NYSE: TX )||****||(17%)|
|Willbros Group (NYSE: WG )||***||(10.7%)|
|Groupon (Nasdaq: GRPN )||*||(9%)|
Sources: Yahoo Finance, Motley Fool CAPS.
With the Dow soaring 291 points on Monday, or 2.6%, stocks that went down by even larger percentages are pretty big deals.
That's going to leave a mark
The possibility of overpaying for a stake in rival Brazilian steelmaker Usiminas was bad enough to send shares of Ternium 18% lower. But the reality that it's actually going through with the deal apparently is just as calamitous.
The purchase seems pretty convoluted. The Techint Group, through Ternium and its other subsidiary Tenaris (NYSE: TS ) , along with Nippon Steel, a previous Usiminas stakeholder, will now control 63.9% of the voting shares of the steelmaker. Companhia Siderurgica Nacional (NYSE: SID ) , which had been buying up both common and preferred shares for a takeover effort of its own, had its maneuver blocked. Now neither Nippon nor Ternium need gain CSN's shares, since they have a controlling interest.
Although Ternium is Latin America's second-largest steelmaker and Tenaris the largest seamless-pipe fabricator, the rising cost of raw materials has been a drag, creating a difficult pricing environment. To me, it seems to be a deal that does no one any good.
With 94% of the CAPS members rating Ternium believing it would outperform the broad indexes, let us know in the comments section below what you think of the situation, and then add the steelmaker to your watchlist to see how the deal plays out.
Engineering-service provider Willbros Group dropped yesterday on no discernable news I could find, though the volume of shares traded was triple its three-month average. While the rest of the CAPS Energy Equipment and Services sector was up more than 4% on the day, with stocks like TETRA Technologies (NYSE: TTI ) surging 13%, Willbros was the notable hold-out.
Recently reported revenue for the third quarter jumped 15% to $466 million -- but that didn't translate to success on the bottom line. Net loss for the quarter was $111 million, or $2.10 per share, on continuing operations, a far cry from the $35 million it earned last year.
Revenue gains were driven by finishing a pipeline project in its upstream oil and gas business but was hurt by its downstream and utility businesses, with projects being delayed by customers and turbulent weather that interfered with operations. Analysts have sharply reduced their expectations for the fourth quarter, now expecting a loss of $0.15 a share, compared with previous projections of a penny-per-share profit just 30 days ago.
Has the stock priced in all the bad news, or is there still more room below? Tell us on the Willbros Group CAPS page if you think it'll bounce back from here, and follow its progress by adding it to the Fool's free portfolio tracker.
A dry well
Doesn't anyone like daily-deals maker Groupon anymore? Before its IPO, that's all anyone could talk about, but now it is a pariah in the market, tumbling well below its $20 public offering and more than 50% off the highs it briefly hit afterwards.
No, no one does like Groupon, nor should they. The company has no competitive moat, as everyone can offer daily deals -- and apparently everyone is doing just that. Whether it's LivingSocial, Google, ReachLocal, or even priceline.com (Nasdaq: PCLN ) offering specials on travel, there's nothing to stop anyone from doing the same thing Groupon is. And with everyone elbowing in, the company can't turn a profit. As CAPS member pchop123 asks, "can you burn cash any faster -- what kind of a business plan is that ???????"
Add the group buying site to your watchlist and see whether it can persuade investors that they should pile into its stock the way they might do with one of its deals.
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.