Why Did My Stock Just Die?

Stocks started the week off down as European worries continued to drag. So even though your stock took a nosedive, too, 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)

Monday's Change

JAKKS Pacific (Nasdaq: JAKK  ) **** (20.2%)
Eastman Kodak (NYSE: EK  ) * (19.9%)
Eldorado Gold (NYSE: EGO  ) *** (13.6%)

The markets fell 100 points yesterday, or almost 1%, so stocks that went down by even larger percentages are pretty big deals.

That's going to leave a mark
It's all fun and games until someone loses an eye. Or slashes full-year guidance. Toymaker JAKKS Pacific dramatically lowered its full-year earnings guidance to a range of $0.37 to $0.40 a share, down from the previous range of $1.32 to $1.35, as higher commodity costs and competitive pricing pressures take their toll.

That also raises questions about how rival toymakers Mattel (Nasdaq: MAT  ) and Hasbro (Nasdaq: HAS  ) will fare. Though appreciably larger and thus able to absorb costs easier, they can't do so with impunity. Yet being closely tied to the movie industry can ameliorate some of the impact, though that also carries its own set of risks.

JAKKS is taking a page from Hasbro's playbook, however, helping to co-produce an animated TV series for which it will produce toys. A collaborative effort between JAKKS and Dentsu, FreemantleMedia, and Topps will produce Monsuno for Nickelodeon, with JAKKS also making the toys. Hasbro owns Discovery Kids, a TV channel with a mix of in-house produced and broadcast content.

Highly rated CAPS All-Star tenmiles thinks the haircut it got yesterday positions it for a nice recovery because of its healthy cash balance and tempting dividend. Add JAKKS Pacific to your watchlist and see whether it can recover from this time-out.

In the breakdown lane
One of the weakest arguments in favor of an investment in Eastman Kodak was its becoming a powerhouse printer maker that stood the typical razors-and-blade model on its head. Supposedly charging a premium for its printers but selling ink replacements cheaply would catapult it ahead of Hewlett-Packard (NYSE: HPQ  ) and Lexmark, which virtually give their printers away but charge dearly for replacement cartridges.

And just as Kodak is pursuing a failed policy of pursuing patent infringement lawsuits, Kyocera is turning the tables and alleging that Kodak's printers violate its own patents. Whether it will have any more success than Kodak has had remains to be seen, but the once-iconic filmmaker's ramparts are no longer unassailable.

Moreover, Kodak might not be able to raise the funds it needs to stave off bankruptcy. With all the one-time cash infusions needed for a successful turnaround strategy drying up, the end is near. I've long since marked Kodak on CAPS to underperform the broad indexes, but trysson thinks there might be some value in a company that is broken up: "There are a lot more good things that can happen that will help the stock valuation than bad things. Good things such as (1) a change of point-of-view at top management,(2) an end to IP litigation, (3) the coming along of a suitor and (4) spinning off profitable divisions will help the stock outperform the market and will return some additional value to the stockholders."

Take a picture now, because Kodak may not be around tomorrow. But let us know in the comments section below or on the Eastman Kodak CAPS page if you think it can survive, and follow its progress by adding it to the Fool's free portfolio tracker.

Crash and burn
Although Eldorado Gold's $2.4 billion offer to buy European Goldfields will enhance its ability to produce gold, the market didn't appear to like the news, perhaps because the target's mines are located in Greece and Romania, but also because Eldorado will be issuing shares to purchase the miner.

Eldorado will dilute existing shareholders by about 28%, but according to management, the combined company would not only have lower cash costs but also produce 650,000 ounces of gold annually and more than 1.5 million ounces by 2015. For reference, Goldcorp (NYSE: GG  ) is one of the lower-cost large producers, and just one of its mines, the recently approved Eleonore project in northern Quebec, is expected to produce 600,000 ounces a year with cash costs of just $400 per ounce.

It may take some time for the market to absorb the new shares Eldorado will issue, but CAPS member BJRM is looking for it to recover over the next few months: "I expect the seasonal bounce and worries about global geopolitical and economic dysfunction, to offset in the short term, the growing realization that the inflation everybody has been worried about will take a while to bite and short term we may have some serious disinflation and persistently sloppy global economy."

Add the gold miner to your watchlist, and tell us on the Eldorado Gold CAPS page whether you think Goldfields is a nugget of opportunity.

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. Balance out the extremes by having a mix of stocks, funds, and ETFs that will help you maximize your retirement savings. You can find them in The Motley Fool's brand new report, "The Shocking Can't-Miss Truth About Your Retirement." This is a special free report that you can access right now -- it's free.

Fool contributor Rich Duprey holds no position in any company mentioned. Check out his holdings and a short bio. Motley Fool newsletter services have recommended buying shares of Hasbro and Mattel. 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 (5) | 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 December 20, 2011, at 6:38 PM, trysson wrote:

    When one talks about Eastman Kodak printers, one is not talking about Kodak Office Hero, which just happens to be a very good little office printer that has color that will last forever on the paper, but one is talking about world-class, state-of-the-art high production, million-run printers that no other company in the world can duplicate. Hands down, this is the next generation in mass duplication at the commercial level. Forget the office laser printer that makes 500 copies for the next ad campaign. Anyone can do that. Try duplicating Kodak's commercial printers for quality and cost. Can't be done.

  • Report this Comment On December 20, 2011, at 7:47 PM, trickytom wrote:

    AFTER 32 YRS IN KODAK RESEARCH, Ii FEEL IT HAS VERY LITTLE CHANCE OF SURVIVAL. CORPORATE LEADERS WITH FISHER AND CARP AT THE HELM FLEECED THE COMAPNY WITH SALES OF CRITICAL BUSINESSES FOR SEATS AT OTHER COMPANIES. ALONG WITH THE SALES WAS THEIR STRENGTH IN RESEARCH. RESEARCH IS VERY SHALLOW AND OUTDATED. INTELLECTUAL PROPERTY IS OUTDATED AND HAS MUCH LESS VALUE THAN PRECEIVED. THE POSTPHONEMENT OF PATENT INFRINGMENT WAS TO GIVE KODAK TIME TO SEEK OTHER ALTERNATIVES BEFORE PUBLIC DENIAL WHICH WOULD CLOSE THE DOORS QUICKLY.

  • Report this Comment On December 20, 2011, at 8:35 PM, CMMM wrote:

    And just as Kodak is pursuing a failed policy of pursuing patent infringement lawsuits, Kyocera is turning the tables and alleging that Kodak's printers violate its own patents. Whether it will have any more success than Kodak has had remains to be seen, but the once-iconic filmmaker's ramparts are no longer unassailable

    All companies go after patient infringements. It takes a substantial amount of money to get those patients. Kodak has won similar cases against other companies for using the same technology that Apple is trying to use. Kodak has a wealth of technological patients and those in question are but a drop in the bucket. Kodak has a lot of good products coming down the pipe and you will be surprised. People love to see thing fail don't they???? Kodak will not be the company it once was. They are not trying to be. But it will be a still be around for a long time.....

  • Report this Comment On December 20, 2011, at 8:37 PM, jerr1 wrote:

    maybe your stock died for reason here lets connect dots. Options set to expire december 17th . December 19th law suite filed against kodak for printers. Loan an money problems announced december 19 . Final was announcement of extension of patent between kodak an apple an rimm . Whats chances of all 4 events happening with in 24 hours ,Almost like it was planned to fall 20 percent shorts are loving this question is who is shorts an who gained most from stock falling

  • Report this Comment On December 20, 2011, at 9:50 PM, McCormckmaro wrote:

    EK is (or was) a consumable biz. They sold film, paper and printers plates. The technology was a vehicle for the consumables.

    Google and Apple are the same way. They sell ad clicks or iTunes. Kodak believed there own marketing and forgot. They are not and never will be bigger than consumables. Technology will be as important.

    Unfortunately they are as relevant as buggy whips since the never managed to find that cutting age consumable.

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