The Bizarre Sell-Offs at Capstone Turbine Corporation, China Ming Yang Wind Power Group, and Revolution Lighting Technologies Inc.

Find out why these three little stocks plummeted in trading today, and what it means going forward.

Jan 23, 2014 at 9:18PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis. 

While a slew of disappointing U.S. economic data sucked juice out of the broader market today, investors in three little stocks were left scratching their heads as the shares crashed for no apparent reason after rallying most days so far this year.

While shares of microturbine maker, Capstone Turbine (NASDAQ:CPST) shed 6% in early trading today, Revolution Lighting Technologies (NASDAQ:RVLT) stock flickered out to give up 7% this morning. But China Ming Yang Wind Power Group (NYSE:MY) turned out to be the real disaster today, with shares tumbling as much as 10% at one point in trading.

So was this just an unfortunate day for these stocks, or are their good days over?

Capstone looks safe
Despite today's fall, Capstone investors should be a happy lot because the stock still remains an outperformer -- until yesterday, the stock had zoomed a whopping 30% year to date. Capstone has already bagged several orders from markets across the globe this month, which seem to have convinced investors about the company's growth story. Important ones include orders from the lucrative and high-potential oil and gas sector, including those from leading companies operating in key regions such as Marcellus, Utica Shale, and Permian Basin.

With no adverse company news in sight, investors may have realized that all that good news may have already been baked into the price of Capstone's shares; therefore, they decided to take some profits off the table today. I don't think there's much to worry about here, since Capstone remains a compelling story, especially with global emission regulations getting stricter. With orders swelling, and top line growing at an accelerating pace, Capstone losses may soon turn around.

Nothing great about this revolution
Revolution Lighting's story, on the other hand, presents a completely different picture. The LED lighting solutions maker's last order is already more than a month old, and it has yet to open books this year. After gaining a staggering 400% in 2013, Revolution shares have cooled down, remaining flattish this month.

On a positive note, Revolution is spreading its wings to markets outside the U.S., while growing its base through acquisitions. Seesmart Technologies, which Revolution took over last year, is already adding great value to the company. But management is struggling to tame costs, and Revolution's losses are expanding. Moreover, LED lamps may have great prospects going forward, but it's a highly fragmented and competitive industry. With big names like Cree, Koninklijke Philips, and GE Lighting dominating the market, Revolution may have to create its own opportunities to get a foothold in the market.

Given the backdrop, last year's rally in Revolution's stock appears unwarranted. It seems to have turned into a trader's game, and today's fall only substantiates that. The shares took off yesterday, only to give up the gains today. Revolution is certainly not the brightest choice in the LED space for investors out there.

China Ming Yang just turned uglier
Unlike the other two stocks, China Ming Yang investors actually had a valid reason to dump the stock today. The just-released weak manufacturing data out of China could signal further economic slowdown, which naturally bodes ill for the company. Today's bad news wiped out most of the 12% year-to-date gains that China Ming Yang stock had clocked as of yesterday's close.

Like in Revolution Lighting's case, rising costs are eating into China Ming Yang's top line growth. Worse yet, management has no clue about when the company will expectedly break even. So investors practically have no way to assess where the company's headed to.

Bulls may be thriving on how China Ming Yang is rapidly gaining market share in the Chinese wind power market, but the company's global scene is nothing to write home about. Except for an order from India, it has little exposure to international markets. So if China slows down, China Ming Yang's growth could hit a wall. It looks dicey to me, and the shares could only get more volatile from here. Those with weak hearts should certainly stay away.

Are these stocks too risky for your taste? Play safe with this ready-to-pop stock
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

 

Fool contributor Neha Chamaria has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers