Why Did My Stock Just Die?

Your stock just took a nosedive -- but don't panic. First, let's see whether it had good reason to fall. Sometimes, panic-fueled drops can make excellent buying opportunities. Here's the latest crop of cratered stocks that could provide a possibility for profit:

The devil's in the details
On a day when the market was up big at 198 points, or almost 2%, Friday's declines that went big in the other direction are big deals.

Volatility, thy name is Vical. The biopharmaceutical was on a roller coaster ride last week, with shares having a third of their value sliced off, then bounding back 10% the next day, only to close out the week on the losing end of the stick. Its blood vessel regeneration therapy being developed with sanofi-aventis (NYSE: SNY) was found to be no more effective than a placebo, and the markets are still sorting it out. It's also not helping that it priced its secondary offering at $2.25 a share. No need for the stock to trade much higher than that.

Yet CAPS All-Star member and biotech guru zzlangerhans expects to see the stock bounce back, primarily because it will have results to report on a different treatment next year.

Vical's strongest asset at this time is the phase III trial of Allovectin-7 in melanoma, with topline results expected in mid-2011. I expect the results of this trial to be negative but the nature of baby biotech should cause the share price to increase dramatically in the months leading up to topline results. In addition, Vical has ongoing early phase trials of vaccines for H1N1 and HSV-2. With the cash from the dilutive financing under their belts, the Vical story is far from over.

The sky's not the limit
Investors were pretty shocked back in January 2009 when Indian information services specialist Mahindra Satyam found itself in a fraudulent accounting scandal. At the time it was known as Satyam Computer Services and was saved from oblivion by Tech Mahindra. Yet it was never able to really recover as IT outsourcing firms like Cognizant Technology Solutions (Nasdaq: CTSH) and Infosys (Nasdaq: INFY) reported ever-stronger results, and Satyam had to delay filing its financial statements.

Apparently they're still so convoluted that Satyam will delist from the New York Stock Exchange in mid-October, and that was the reason for the IT specialist's fall last week. It had always maintained a strong following on CAPS with almost 97% of the nearly 1,400 members rating Satyam to outperform the broad market averages. That will come to an end when it finally delists.

Don't bring me down
While Oncolytics Biotech is another biotech that fell last Friday, its shares are still some 20% higher than they were two weeks ago and 45% above the level they traded at the start of the month when it reported a mid-stage ovarian cancer study involving its Reolysin treatment was approved. It's hoping its proprietary formulation of the reovirus can be educated to recognize and kill cancer cells, but as a largely unknown biotech it has been flying below the radar of most investors.

It hasn't escaped the notice of CAPS All-Star UltraLong who says Oncolytics long history of diluting shareholders probably won't change much for the immediate future.

Sure they have a phase III trial in the works for Reolysin, but the overall revenue impact if approved based on what I'm seeing is about 60-70M within four years... so they're already trading at 4-5 times their revenue value four YEARS from now. They probably have enough cash to make it 16 months from this point on, so you know what that means..more diluting! A long history of losses and frankly just too much froth. It's trading higher because it's a low volume stock that has caught a hedge fund's attention, nothing more. It will be back under $4 in no time.

There's always a lot of speculation about these wonder drugs until they reach late stage trials, which might be why more than a third of CAPS members rating Oncolytics think it will underperform the market. They'll want to see something more concrete down the road.

CEL-SCI (NYSE: CVM), for example, has been full of promise trying to get into phase 3 trials with its Multikine head and neck cancer treatment, and its stock has been running higher on rumors of a possible buyout. But on Friday they finally sagged too, as it's tough to keep momentum going without something more to show for it.

Let us know in the comments section below or on the Oncolytics Biotech CAPS page if this stock will need a dose of Ritalin to combat its volatility. You can also add it to your My Watchlist page where all the Foolish news and analysis about this stock is aggregated for you.

Ready for a resurrection
Just because your stock has taken a beating doesn't mean it's going to roll over and die. Markets are known for overreacting. A closer look at what's happened to your stock can give you an edge over other investors who just react to the market's lead.

That's why it pays to start your own research on these stocks on Motley Fool CAPS where you can read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from the stock's CAPS page. Then you can decide for yourself whether it's ready to come back from the dead.