Why Did My Stock Just Die?

The market has traded in a flat range since the year started, but yesterday took a large tick upwards even though not everyone got to go along for the ride. If 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 are two of the latest crop of cratered stocks that could provide a possibility for profit:

Stock

CAPS Rating (out of 5)

Tuesday's Change

Sunoco (NYSE: SUN  ) **** (12.4%)
GenOn Energy (NYSE: GEN  ) **** (9.3%)

Source: Motley Fool CAPS.

The Dow jumped almost 100 points yesterday, or 0.8%, so stocks that went down by even larger percentages are pretty big deals.

Toto, we're not in Nebraska anymore
The Obama administration rejected the important Keystone XL pipeline, sending shares of TransCanada and Chevron (NYSE: CVX  ) lower. And with per-barrel oil prices falling to $100 on fears of weakening demand, a drop in value like that experienced by Sunoco yesterday might have caused some investors concern that something big was afoot.

Although there was news, it wasn't bad: The refiner had just finished spinning off SunCoke Energy, the largest independent producer of high-quality metallurgical coke in the Americas. Unlike the case with its other division, Sunoco Logitistics (NYSE: SXL  ) , a pipelines- and-product terminal operator in which it still owns a 34% interest, Sunoco fully divested itself of SunCoke, giving shareholders just over 53 shares of SunCoke for every 100 shares of Sunoco they owned.

Add the oil company to My Watchlist to see if there's additional value to be found in this stock, and head over to the Sunoco CAPS page and let us know if, having calved off its coking coal producer, it will be able to enjoy greater growth prospects.

Not getting a spark
Utilities are supposed to be stable, profitable, dividend-paying businesses, particularly during periods of financial turmoil. That ought to make a good case for GenOn Energy, a utility born from the merger of Mirant and RRI Energy, to become one of the largest independent power producers in the country. Yet it has hardly been a rock for shareholders over the past year, as they've lost half the value of their investment. 

Part of that was due to fear of the implementation of the EPA's Cross-State Air Pollution Rule that would have shut down coal-fired power plants across the country. Nearly a third of GenOn's 23,692 megawatts of generating capacity is provided by coal, and the rule would have required the utility to reduce emissions at two Pennsylvania plants by 60% starting in January 2013 and by 80% in 2015. While that would have led to an increase in energy generation at its natural-gas facilities (which accounts for 37% of its capacity), prices of gas have fallen through the floor again, hitting their lowest levels in a decade.  

The CSAPR regulations won't cripple everyone, of course. Exelon (NYSE: EXC  ) , for example, has a broad portfolio of nuclear-powered plants that will benefit as energy prices rise and regulations make it harder for others to survive.

Still, GenOn has unanimous support from CAPS All-Star members, and there's only one dissenting voice in the wider community. Add GenOn Energy to your Watchlist to see if it can overcome the hurdles the EPA is putting in its path.

Ready for a resurrection
Your stock may have 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 simply by clicking here -- it's free.

Fool contributor Rich Duprey holds no position in any company mentioned. Click here to see his holdings and a short bio. Motley Fool newsletter services have recommended buying shares of TransCanada, Exelon, and Chevron, as well as writing a covered strangle position in Exelon. 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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