Why Did These 2 Stocks Roll Over?

After some of its worst days of the year so far, the markets have rallied once again after the head of the New York Federal Reserve said this low interest rate environment is here to stay. But with these companies below going in the other direction in the face of such a strong surge, first let's see whether they had good reason to drop. Sometimes, panic-fueled declines can make excellent buying opportunities.

The Dow spiked 181 points or 1.4% yesterday, getting close to the 13,000 level once again, so stocks that went down by larger percentages are pretty big deals. Here are two stocks that fell that could provide a possibility for profit:

Stock

CAPS Rating (out of 5)

Thursday's Change

Arena Pharmaceuticals (Nasdaq: ARNA  ) ** (6.5%)
Barnes & Noble (NYSE: BKS  ) * (6.4%)

That's going to leave a mark
Just the other day I said an FDA advisory panel's recommendation for approval of VIVUS' (Nasdaq: VVUS  ) fat-loss drug was no reason to expect the regulatory agency to give it its imprimatur, let alone provide any sort of halo effect, for Arena Pharmaceuticals or Orexigen Therapeutics. Both of those company's stocks had spiked higher as investors suspected there was a new aura surrounding the FDA and its antipathy toward fat-loss treatments.

Well, as was expected, the FDA said it was going to take another three months to think about VIVUS' Qnexa. But the fallout from the delay might not be as serious as it looks on its face and may be why Arena's shares are down less than 7% (VIVUS' stock barely budged). The biotech submitted new data to the FDA regarding its drug's risk management profile, and said such delays are common when new data are submitted.

Of course that doesn't mean the FDA will be any more swayed by the arguments. It rejected all three drugs previously and hasn't approved any fat-loss drugs since 1999. Since I still think it's pretty much a crapshoot whether the FDA approves a drug, I'll continue to refrain from making a CAPScall on Arena, though the Fool's Brian Orelli surmises the delay for VIVUS could be seen as a potential negative outcome for Arena, which has its own date with destiny next month.

Tell me in the comments section below or on the Arena Pharmaceuticals CAPS page whether you think the delay dooms lorcaserin, then add the stock to your watchlist to be notified of the outcome as soon as it occurs.

Read all about it!
A settlement among e-book publishers and the Justice Department over pricing could become a runaway best-seller for Amazon.com (Nasdaq: AMZN  ) but could be a loser for rival Barnes & Noble.

Amazon, because of its broad product catalog, can afford to take losses on e-books, as it can make up the difference elsewhere. More narrowly focused Barnes & Noble, which has been struggling to effectively establish its e-book presence, doesn't have the same breadth of inventory to absorb losses very long. It had been doing better than expected, having gained more than 27% of the e-book space as it didn't have to discount prices all that much, but that might change as a result of the ruling.

Apple (Nasdaq: AAPL  ) was also part of the suit against e-book publishers, but it refused to settle. It says just as it allows developers to set the prices of the apps they sell in its iTunes App Store, it allows e-book publishers to set their own prices.

I had rated Barnes & Noble to outperform the market in part because of the success it achieved in establishing its Nook as a viable competitor to Amazon's Kindle (and also because of a nostalgic affinity for bookstores where I can stand among the stacks and be surrounded by books), but with its profit center being so centrally challenged, I'll be closing out my outperform rating on CAPS. As zolibork notes, "Sad to see it go, but there are more efficient ways to get the same content." Yes, sad but true.

Add Barnes & Noble to your watchlist to see if this settlement closes another chapter in a once storied past.

Ready for a resurrection
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Fool contributor Rich Duprey owns shares of Apple, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Amazon.com and Apple. Motley Fool newsletter services have recommended buying shares of Amazon.com and Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Motley Fool newsletter services have recommended writing puts on Barnes & Noble. 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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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 April 13, 2012, at 4:50 PM, mbates50 wrote:

    "Bad Luck on Friday the 13th: Stocks Log Worst Week of 2012"...

    This from today's Fox site. What rally, dude??

    Arena was up 2.5%, DJIA down over 1%.

    What planet are you from?

  • Report this Comment On April 16, 2012, at 10:12 AM, bmc007 wrote:

    The fact that the FDA needs another three months to deal with VVUS' application gives ARNA the advantage of being the first. That's good news. Also, Lorcaserin appears to be safer and already has interest from Europe. I think you'll see the s/p rising between now and May 10th.

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