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.
CAPS Rating (out of 5)
|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."
Ready for a resurrection
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