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:

Stock

CAPS Rating
(out of 5)

Monday's Change

WebMD Health (Nasdaq: WBMD)*(30.1%)
Radian Group (NYSE: RDN)*(13.8%)
Allied Irish Banks (NYSE: AIB)****(12.4%)

With the Greek bailout only a stopgap measure and fears of a default contagion spreading to Europe, the market dropped 151 points yesterday, or 1.2%. So stocks that went down by even larger percentages are pretty big deals.

The devil's in the details
Health-care information provider WebMD Health actually saw a 30% increase in the number of visitors to its website and a 24% increase in the number of page views, to more than 2.1 billion during the second quarter. Despite that, advertisers are bailing on WebMD and the info center had to reduce its profit forecasts because of the reduced revenues. Investors wanted to avoid the stock like the plague and shares dropped 30% on the news, its largest decline ever.

WebMD also has an exclusive revenue-sharing arrangement with Yahoo! (Nasdaq: YHOO) that's based on the amount of advertising it places on the site and the traffic that goes back and forth between them. If WebMD can't deliver enough eyeballs, Yahoo! has the right to cancel the deal. Whether this revised guidance ultimately affects that agreement remains to be seen, but there were warning signs posted along the way that things weren't healthy at the company.

While the dozen analysts rating WebMD were unanimous in their belief that the information provider would outperform the broad market averages, the CAPS community was far more circumspect, with less than two-thirds of the members who weighed in thinking it could beat the Street. Let us know on the WebMD Health CAPS page if you think the prognosis is good for a recovery.

Knowledge is power
Was anyone really surprised that mortgage insurer MGIC Investment (NYSE: MTG) reported losses a heckuva lot worse than expected? Housing is ill and things are not getting better. MGIC's claims from defaults jumped 44% in the quarter and it sunk stocks across the industry. Radian Group and PMI Group (NYSE: PMI) both fell in response to MGIC's results, and one wonders if the analysts at ratings agency Standard & Poor's are rethinking their love letter to PMI Group, in which they essentially said, "you're lousy, but we don't think it's going to get worse."

With the government trying to get Fannie Mae and Freddie Mac out from under the rock they're under in terms of supporting the mortgage industry, private insurers like Radian and MGIC could see more business come their way. But housing has a lot further to fall and homeowners have a lot more pain in their future before that happens.

Earlier this year, CAPS member Loerke likened Radian to a canary in a coal mine for the industry, and didn't much care for management's role in its decline:

Back then, the huge losses were seen as making the stock attractive to value investors, and today we're hearing the same thing after what must be an almost record-setting $8.55 a share quarterly loss on a $7 stock. For value investors, it helps that the stock is almost trading at book, but I would definitely take a look at any number of insurers trading around book value before I took a gamble on a company with a notoriously bad history.

You can follow along on the mortgage insurer's travails by adding the stock to the Fool's free portfolio tracker.

Don't bank on it
Another ailing industry with little prospect for a quick turnaround is the European banking industry, which has been under the gun for the better part of a year now. European banks -- and particularly those in Ireland -- cratered yesterday in unison as it's become increasingly apparent that the stress tests have not bolstered confidence in the financial system. Seen as something of a paper tiger, the crumbling finances of sovereign nations have everyone worried the banks are really worse than suspected.

Allied Irish Banks and Bank of Ireland (NYSE: IRE) were both down nearly 13%. Royal Bank of Scotland was down 12% and Lloyds Banking Group was down 7%. It was not a good time to be a banker in Great Britain.

I'm not sure what investors see as the catalyst for a turnaround at Allied Irish Banks. When I marked it last December to underperform the markets, I saw little in the argument of "too big to fail" and, as CAPS member hondamikesd points out, its huge share offering will massively dilute current shareholders: "Issuing 39 new shares at 0.1 euro for every share you currently have is bound to cause your share price to take a hit."

Follow along on AIB's development by adding it to your watchlist and tell me in the comments section below or on the Allied Irish Banks CAPS page what I'm missing.

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 on Motley Fool CAPS at what's happened to your stock can give you an edge over other investors who just react to the market's lead. You can decide for yourself whether it's ready to come back from the dead.

Fool contributor Rich Duprey owns shares of Lloyds Banking Group, but does not have a financial position in any of the other stocks mentioned in the article. You can see his holdings here.

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