It's difficult to think there are stocks that tumbled on a day when the Dow Jones Industrial Average surged 277 points, or 2.2%, after Germany caved to demands from Italy and Spain to be bailed out or face the prospect of their blocking "everything." Yet some companies did manage to go in the other direction Friday, and by fairly significant percentages.
But let's see whether they had good reason to drop and sit out the crazy ride up, as panic-fueled declines can sometimes make for excellent buying opportunities.
(out of 5)
|Research In Motion (Nasdaq: RIMM )
|Nike (NYSE: NKE )
|Osiris Therapeutics (Nasdaq: OSIR )
|A123 Systems (Nasdaq: AONE )
|Suntech Power (NYSE: STP )
A demand economy
Swift of foot it may be, but Nike stumbled badly Friday after reporting full-year earnings that saw profits contract by 150 basis points. Some analysts look to the Summer Olympics in London as a catalyst for new growth, but China tied the footwear maker's laces together as sales rose just 2% in the fourth quarter compared to 20% in the third. Nike's face-plant looks every bit as hard as the economic landing China is experiencing.
And once again there was nothing to drive Osiris Therapeutics down again for the second time in three days. It was likely more profit-taking after the huge run-up in its stock over the past month after getting its Prochymal treatment approved in Canada and New Zealand. The stock has doubled year to date and there's no reason to expect it will continue losing all those gains.
It was the same situation at Suntech Power, where there was nothing to account for the stock's drop, although a Bloomberg article noted that renewable energy "investments" may double in Japan beginning July 1, as new subsidies take effect. However, one analyst said Japan needs to follow Europe's lead and cut its subsidies, since it currently receives triple the tariffs other renewable forms of energy do. I've been bearish on solar stocks for a while and have rated Suntech to underperform the market on CAPS since the beginning of the year. Friday's decline only adds to my winning CAPSCall.
I've been similarly bearish for a similar length of time on lithium-ion battery maker A123 Systems, believing the electric vehicle market isn't as ready for prime time as its proponents hope. That call has also served me well on CAPS, and I wrote two weeks ago that I felt it was going to go bankrupt sooner than later. On Friday, analysts at Wunderlich Securities confirmed that the new and improved batteries it was developing -- you can forget all those others it had built and then had to recall -- likely wouldn't arrive before it ran out of money. The analyst excoriated the company and assigned it a $0.50 price target, and said it "would be zero except that we believe the factory has some residual scrap value." Ouch.
A cash crunch also accounted for Research In Motion losing a fifth of its value to close out the week. It's delaying the release of its next-generation phone, recorded a larger-than-expected loss, and is firing as many as 5,000 employees. Not exactly the growth company of yesteryear.
What RIM does have going for it is a substantial portfolio of patents that could be worth a lot of money. And as damaged as the BlackBerry might be, it also holds considerable value while the new OS that was supposed to lead the company's resurrection -- when it comes out -- could add more.
The Motley Fool's Chris Baines believes the end is nigh for RIM and instead of selling off just the BlackBerry, it should sell the entire company: "There's only one honorable thing RIM can do for its besieged owners, i.e. you, the common shareholder: Sell itself. Either as a whole, or via an orderly liquidation of core assets."
Patents can be valuable, if someone is willing to buy them. Kodak thought it could save itself from bankruptcy by selling its vast portfolio to the highest bidder, only no one showed up at the auction. Instead, they waited for the once-iconic camera maker to take a dirt nap and then moved in to buy the patents at a steep discount. It may end up being a similar future for Research In Motion.
Tell me on the Research In Motion CAPS page or in the comments section below what you think the stock should be valued at.
Ready for a resurrection
The mobile revolution is a game-changing revolution that's permanently altered the landscape, but now there's a new tech upheaval on the horizon and you'll want to capitalize on it with The Motley Fool's new free report "The Only Stock You Need To Profit From the NEW Technology Revolution." Download your copy today and find out what this breakthrough technology is that's changing the face of business. Get your copy today before it's gone!