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 for excellent buying opportunities. Here's the latest crop of cratered stocks that could provide a possibility for profit:

On a day when the market broke through what some consider the psychologically important 11,000-point barrier, stocks that went big in the other direction on Friday are big deals.

The devil's in the details
Everyone -- not just the consumer -- wants to be a penny-pincher these days. As the economy's recovery stagnates, retailers are repositioning themselves as discounters that offer shoppers the best value. The intense competition for the consumer's dollar ate into the revenues realized by 99 Cents Only Stores, particularly in Texas. Apparently the state that does everything big is going deep discount in a big way, too.

It's not an industrywide phenomenon. Family Dollar (NYSE: FDO), for example, recently raised its third-quarter earnings guidance to $3.04 to $3.24 per share from its previous forecast of $2.95 to $3.15. That could be why nearly a quarter of Motley Fool CAPS members rating 99 Cents Only think it isn't a good value for your buck and will underperform the broad market averages.

The sky's not the limit
When even management doesn't think its stock is worth what it's trading at, it's natural for the market to follow it down. Cytori Therapeutics had been about 30% higher over the past three months, so it wasn't surprising that management wanted to cash in on the bigger valuations through a secondary offering. What seemed to surprise the market was the decision to price the offering at a 15% discount to where the shares were trading.

Cytori said it would offer 4 million shares for just $4.50 apiece, a significant discount to the $5.34 per-share close the day before the announcement. Vical (Nasdaq: VICL) was another biotech that doomed its own stock by pricing its secondary offering at big discounts.

CAPS investors are more confident about Cytori bouncing back, with 82% of members rating the stock believing it will offer market-beating performance. TBraymanJr likes its innovative technology.

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Don't bring me down
It wasn't that long ago that Kulicke & Soffa Industries, a semiconductor-assembly equipment maker, promised revenues were growing smartly and would continue to do so. Customer demand had soared 50% in the latest quarter, leading to a quadrupling of sales. But after the market closed on Thursday, management announced that the next quarter's revenues would be "significantly below" revenue from the previous quarter.

That means the chip industry might be in for a rough patch. Both LAM Research (Nasdaq: LRCX) and KLA-Tencor (Nasdaq: KLAC) were downgraded to a sell rating by analysts who expect the sector to be affected.

CAPS member BTM2SEA looked at Kulicke & Soffa's heavily discounted valuation a week ago:

So a P/E at <10 caught my eye. Even with the uncertainty in this sector, the price looks to be at a good entry point.

Let us know what you think in the comments section below or on the Kulicke & Soffa CAPS page. 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 has 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. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page. Then you can decide for yourself whether it's ready to come back.