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 market ended February with a strong run, rising nearly 100 points, or almost 1%, as oil prices halted their meteoric rise. The market actually climbed almost 3% for the month, making it the third straight month it ended up, so stocks that went in the other direction by large percentages are even bigger deals.

The devil's in the details
We noted just the other day that while trucking giant YRC Worldwide was gaining mileage on a turnaround plan, there remained significant risk of it running off the road again. Truck tonnage volumes might be up, but YRC's own numbers were down and it was laden with debt that it would have real trouble paying.

The owner of Roadway and Yellow truck brands may have been a favorite of Wall Street analysts, but the CAPS community has preferred the light-asset, owner/operator model of Universal Truckload Services and the operations of Heartland Express (Nasdaq: HTLD).

With good reason it seems. YRC's stock hit a big pothole yesterday when it announced a deal that ought to help its survival, but at significant cost to shareholders. In part, lenders agreed to inject new capital into the trucker and defer interest and fees until after the deal is approved, which is expected to occur by July. The hardest part for investors was the substantial dilution of their ownership stake by giving employees of the truckers' union a "meaningful" equity stake in the company. And after all that, YRC said it still couldn't guarantee it wouldn't need to seek bankruptcy protection.

CAPS member hodini1926 predicted the massive dilution in the works, but said a better bet might be a change in management.

The CEO needs to go to restore confidence to shareholders. The CEO is also Board Chairman and President after 4 years of annual losses. He's as entrenched as ever, something wrong with that picture? They will need to dilute from a better share price to stay listed and create capital to pay down debt all in order to meet covenants with their union. Maybe a new CEO will provide the confidence. Just a thought.

Let us know on the YRC Worldwide CAPS page whether this plan will permanently put the trucker up on blocks or place it back on the road to recovery.

Drill down further
Manny, Moe, and Jack decided that while there was interest in their auto parts business, potential suitors weren't willing to pay up for Pep Boys. They thought they'd be able to get something in the high teens for their operations, but apparently no one thought it was worth more than $10 or $11 a share.

With new car sales moving into the fast lane, the investment thesis that helped prop up Pep Boys, AutoZone (NYSE: AZO), and O'Reilly Auto Parts (Nasdaq: ORLY) evaporated. People don't need to keep their jalopies on the road longer -- they're just buying new cars -- so aftermarket parts aren't a critical necessity anymore. Of course, the parts stores also sell to commercial repair shops, so there's still value in the auto parts market even in a recovering economy, albeit a slow one.

Almost 80% of the CAPS members rating Pep Boys think it will outperform the broad market averages. You can follow whether a well-heeled buyer comes along flashing enough cash by adding the stock to your watchlist.

That sinking feeling
It's not the first time inverter manufacturer Power-One has seen its stock dive in February. Earlier last month it tumbled 20% after offering less-than-electrifying guidance. When Satcon Technology (Nasdaq: SATC) followed that up with its own disappointing results, it seemed to confirm there was trouble in the sector.

There was no particular news to account for yesterday's drop, though bearish options activity ahead of the March 18 expiry date caught the notice of some traders. It remains a bullish pick among CAPS players, however, with 97% of the CAPS members rating the energy conversion products maker marking it to beat the Street over the long haul.

You can add Power-One to the Fool's free, personalized portfolio tracker to see whether it will be able to power up the dour outlook some investors have for its prospects.

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.