Why Did My Stock Just Die?

Fears of Europe's new recession and a skidding China sent the Dow down yesterday, with component companies such as Caterpillar and Alcoa -- both of which are heavily dependent on international markets -- taking it on the chin. But with other companies falling even further, first let's see whether they had good reason to fall, too. Sometimes panic-fueled drops can make excellent buying opportunities.

The markets fell 78 points yesterday, the third day in a row they've fallen and the fourth out of the last five, so stocks that went down by large percentages are still a big deal. Here are two other stocks that cratered and could promise future profit:

Stock

CAPS Rating (out of 5)

Thursday's Change

Cenveo (NYSE: CVO  ) *** (18.9%)
FuelCell Energy (Nasdaq: FCEL  ) * (11.9%)

Source: Motley Fool CAPS.

That's going to leave a mark
Whatever goodwill Cenveo printed with its quarterly report, which missed on revenue forecasts but absolutely crushed earnings estimates, was apparently written down when it announced an increase to its debt reduction plan.

Shares of the printing specialist had been cut in half from its 52-week highs, but they had been slowly gaining traction again only to surge when the earnings report was released. That's similar to the results business print shop VistaPrint (Nasdaq: VPRT  ) saw after reporting better-than-expected results. But after saying it would increase the amount of debt it would repurchase, Cenveo has been in free fall, dropping nearly 30% over the past week.

Yet Cenveo needs to restructure. It has a worrisome $1.2 billion in debt on its book, gained after a costly acquisition a few years ago, and it offsets that with less than $18 million in cash. And in a recession, while operating in a fragmented industry and facing off against much better capitalized rivals like R.R. Donnelley & Sons (NYSE: RRD  ) , the printer needs to get its financial house in order.

Print shops aren't exactly a sexy business, so Cenveo remains an underfollowed company on CAPS. However, I find myself agreeing with highly rated All-Star EnigmaDude that it's one to watch after the precipitous drop in its stock. So I'm making a positive CAPSCall on Cenveo that it will outperform the market going forward, because while its stock is cheap -- it trades at just five times estimates and at a fraction of its sales -- it's also doing what's necessary to right an obviously listing ship.

Printing's not a high-growth business, but Cenveo should move up from here. Add the print specialist to your watchlist and let us know in the comments box below, or on the Cenveo CAPS page, if you think there's more news fit to print about its potential.

Running on empty?
It wasn't offering to buy back debt that sank FuelCell Energy, but rather offering to sell more stock -- 20 million shares at $1.50, to be precise -- that sent the alternative-energy provider tumbling. It priced those shares nearly 15% below where it was then trading, which explains why investors wanted out.

That was bad timing for me, as earlier in the week I indicated my belief on CAPS it would outperform the broad indexes going forward, but if I could double down here, I would, because I remain convinced it will rise once again.

South Korean steelmaker POSCO (NYSE: PKX  ) has been funneling orders into FuelCell because it needs to provide cost-efficient means of fueling its expansion. It placed a 70 MW order with its last year and a follow-up 120 MW order last week. There may be concerns about China's economy faltering, but POSCO is preparing for an expansion in Asian steel demand, particularly in Vietnam, where the company is building capacity.

POSCO has also been buying up shares of FuelCell and is now its largest shareholder with almost 11 million shares, or 22% of the company -- not including the 20 million shares the South Korean utility company recently agreed to buy. That was actually one of my reasons for picking the fuel cell maker to rise:

POSCO's taking an active interest in the alt energy provider because it is expecting a big run up in demand for stainless steel, particularly in Vietnam where it owns two-thirds of the market.

I see FCEL gaining at least a coattails effect if nothing else, and think it's quite possible PXK buys the whole kit and kaboodle to ensure it has access to all the fuel cell supply it needs.

Add FuelCell to the Fool's free portfolio tracker and tell us on the FuelCell Energy CAPS page your opinion on whether it has the power to recover.

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 finding companies that will help you build a solid retirement portfolio. You can find them in The Motley Fool's report, "3 Stocks That Will Help You Retire Rich." 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 Vistaprint V. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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