Why Did These Stocks Just Die?

Comments by Federal Reserve Chairman Ben Bernanke helped the market roar back to life yesterday. But with these companies going in the other direction, first let's see whether they had good reason to fall. Sometimes, panic-fueled drops can make excellent buying opportunities.

The markets jumped 161 points or 1.2% yesterday, so stocks that went down by large percentages are still pretty big deals. Here are two of stocks that fell that could provide a possibility for profit:

Stock

CAPS Rating (out of 5)

Monday's Change

BroadVision (Nasdaq: BVSN  ) * (14%)
A123 Systems (Nasdaq: AONE  ) ** (12.4%)

That's going to leave a mark
Yesterday's tumble by BroadVision is just the latest in a series of big drops the enterprise-level social-network operator has suffered since the beginning of the month, when it reported yet another quarter of lousy earnings. BroadVision's shares have fallen 44% in the past three weeks.

The company has seen revenues dropping in North America and Europe and only inching higher in Asia as a result of having some legacy products on the market there. Don't expect that to continue. Rivals such as Jive Software (Nasdaq: JIVE  ) and Lithium are taking market share by the handful, sporting a client list that includes SAP, Accenture, and Hewlett-Packard. The Hail Mary play BroadVision is making on Clearvale -- software that allows businesses to connect to public social networks like Facebook or Twitter -- seems like so much desperation in comparison.

A few months ago, no one was paying attention to this company, yet as the Fool's Sean Williams has documented, it suddenly has bulls and bears with competing websites flogging the stock. It could help explain why almost 90% of the CAPS All-Stars rating BroadVision see it underperforming the market.

Add the social networker to your watchlist to see how much further it has yet to fall before it becomes an obscure company once again.

Running on empty?
Count me among those betting electric-vehicle battery maker A123 Systems will drive off the road into bankruptcy. Maybe not tomorrow or even by year's end, but I believe this company is going to crash and burn eventually. The $55 million battery recall it initiated is just the beginning of the end, burning up a quarter of its projected revenues for 2012.

The Fool's Travis Hoium calculated A123's operating cash burn at $251 million in 2011, nearly double its rate of the year before. As he notes, "Companies don't go bankrupt because they're posting net losses; they go bankrupt because they run out of cash." The battery maker will have to grow at almost 50% a year (assuming very generous 25% margins) to just turn cash flow positive. 'Tain't happening.

It has high-profile customers such as Fisker, General Motors (NYSE: GM  ) , BMW, and Navistar, but many of them are on shaky ground as well. Fisker got cut off from government subsidies because it can't sell its cars (and A123 is an investor in the company, too) and GM's plans for tens of thousands of EV car sales was simply pie-in-the-sky thinking. Heck, it had to shut down production of the Volt for a few weeks because it couldn't move the cars it already had off dealers' lots.

Interestingly, we saw GM's Volt batteries catching on fire and then Tesla's (Nasdaq: TSLA  ) battery failures turning its pricey sports cars into 2,700-pound bricks. So it suggests that the industry just isn't ready for prime time yet. You already have consumers doubtful of the value of high-priced EVs, and battery failure issues will only make them more hesitant to shell out big bucks.

That's why I'm expecting A123 to eventually go under. I believe this will only spin further out of control from here, so I'm maintaining my underperform rating on CAPS.

But you can add the battery maker to the Fool's free portfolio tracker to watch it succumb to its fate, or tell me in the comments section below or on the A123 Systems CAPS page why you believe that my thinking on this issue is short-circuiting.

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 the 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 -- 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 Tesla Motors, General Motors, and Accenture. The Motley Fool has a disclosure policy. We Fools don't 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.


Read/Post Comments (6) | Recommend This Article (7)

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 March 28, 2012, at 12:44 PM, Cmorganson wrote:

    The author of this article incorrectly states "then Tesla's (Nasdaq: TSLA  ) battery failures turning its pricey sports cars into 2,700-pound bricks.". There have been no Tesla battery failures. Not one. Tesla's battery in the Roadster has performed, and continues to perform, exactly as promised and designed. The battery "bricking" is hype and your reference to it as a battery "failure" is irresponsible.

    For an owner of a Roadster to allow their battery to run down to the point of killing the battery, they would need to (a) have not read the owner's manual in which battery care is covered with great clarity, (b) have ignored their battery level prior to driving, (c) have completely ignored numerous dashboard alerts aggressively warning the driver of a low battery level prior to and while driving, (d) have ignored the vehicle's obvious reduced power when the driver drove it to dangerously low battery levels, which is designed to preserve energy, (e) have failed to plug the vehicle in after use and for a very extended period of time, against owner manual instructions.

    Quit simply, for an owner of a Roadster to "brick" the battery, they simply must be a complete idiot. This would be like an owner of an ICE (a) failing to maintain its engine oil, against owner manual instructions, (b) ignoring all dashboard warnings related to oil and continuing to drive the vehicle, (c) ignoring the reduced performance (although in an ICE this reduced performance is not a design to protect the engine), etc. Additionally, as far as leaving a Tesla Roadster unplugged for extended time (it would take months), that is evuivelent to NOT winterizing your ICE, then parking it in the snow for the winter.

    You wouldn't by a flashlight, leave it turned on, then blame the manufacturer when the batteries died. I certainly wouldn't buy a $100,000+ Roadster, then treat it grossly negligent, which is the only way one could brick the car.

    Again, there have been no Tesla battery failures. A failure is when something does not perform as promised or designed. A failure is not when a something breaks due to gross negligence. Any article that includes such irresponsible language should be discredited and the author's motivations questioned. 

  • Report this Comment On March 28, 2012, at 7:27 PM, iheartweimers wrote:

    http://www.a123systems.com/b62ce06a-2de4-47d4-961b-8486d6fed...

    This is but one of several areas that you and your

    fellow bashers seen not to be aware of in your rush

    to predict the demise of A123 systems. Without

    knocking myself out doing research for you, I'll just

    mention the potential battery contracts with DOD

    for military vehicles and aircraft, where battery life,

    recharge time, capacity and weight are a very much

    desirable feature. Oh yea, then there is the storage

    for wind and solar projects, and for backup storage

    for the massive cloud storage farms like the ones

    Apple and IBM are building. Oh wait!! Let's do this!

    Sell the R&D and patents A123 holds to a foreign

    company, and hope they will be good to us if we

    ever get in another foreign war.

  • Report this Comment On March 28, 2012, at 8:18 PM, Vatirhea wrote:

    I strongly agree that Broadvision makes a good profit opportunity, although this article didn't make a very strong argument for this view. A slightly more objective term for BroadVision's "tumble" would be Elliot wave 4.

    BVSN was up 7% today on a picture perfect pivot at the end of an Elliot wave 4 impulse correction. The Fibonacci prediction was for wave 4 to terminate after a 62.8% retrace from the wave 3 high of $56.46. That put the projected pivot point at $27.47. What BVSN actually did yesterday was bounce off a low of $26.30 meaning that it over-shot its projected pivot point by only $1.17.

    In my opinion, this is very impressive for a stock as volatile as BVSN.

    However, I don't see any other indicators that say this isn't just a bounce in a further correction. I've done some other Fibonacci analysis that shows another level of support starting around $18.75. So, I'm looking for a double bottom or a bullish strong bar tomorrow as confirmation that it has changed its trend. If I don't get one of those, I'll be sitting on the sideline looking for a sub-wave 1 and 2 signature, and I'll buy in at the beginning of sub-wave 3 of wave 5.

    If today's 7% gain isn't just a bounce in a continuing correction, and if BVSN did execute a near textbook perfect pivot yesterday, that suggests to me that this stock is very stable and responding to organic market forces in spite of all the Internet hype, and the next bull-run could be very profitable due to BVSN's small float and elevated trading volume.

    I made a very nice profit from BVSN's wave 3 bull cycle which started at $9.55 and terminated at $56.46, and I'm excited to get back in the action. I really like this one.

  • Report this Comment On March 29, 2012, at 12:39 AM, hawkise wrote:

    A123 may go south but the people who run it will learn their lessons and some will try again with this knowledge.

    Many ventures that are successful fail the first few times.

    Vehicles not powered by Gas may not be exactly as we envision at this time but eventually it may happen. Without bailouts.

  • Report this Comment On March 30, 2012, at 12:20 PM, JimmyJJr wrote:

    I don't know what the author is telling you but you cant get your hands on a VOLT, they are all pre-sold and you have to get on a waiting list. Whether or not they are still useing A123 batteries I dont know.

  • Report this Comment On April 02, 2012, at 7:37 AM, Baarre wrote:

    Guys, BVSN is just a very well promoted pump. The pump is done so the stock will go quickly to its pre-pumped levels around 8 to 10. The least risky way to make money from this stock is short selling it.

    BVSN has been promoted by Lebed and the National Inflations Association.

    FundAmentals or any standaard technical analysis are not applicable to dying pumped up stocks.

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