Stocks generally gained ground Tuesday as investors remained confident despite some signs of challenges for the U.S. economy. Inflation spiked upward in May, and activity in the homebuilding market declined, raising some fears about the sustainability of some of the key drivers of the recovery during the past several years. Also weighing on market sentiment were negative news reports concerning AeroVironment (NASDAQ:AVAV), Acorda Therapeutics (NASDAQ:ACOR), and Chicago Bridge & Iron (NYSE:CBI), each of which posted substantial losses today.
AeroVironment fell more than 5% after an analyst downgraded the stock, reducing its former buy rating to a hold rating. The maker of unmanned drone aircraft has soared during the past year, with prospects for huge growth for new applications for drones ranging from package delivery to surveillance of corporate facilities in remote locations. Just in the past several weeks, AeroVironment shares have jumped 15% as approval of drone use for BP's Prudhoe Bay facilities, and the prospect of greater unmanned aerial vehicle use in a possible escalation of hostilities in Iraq, helped make investors more aware of the company's potential. Even after a modest pullback today, AeroVironment still has plenty of potential to reverse course and start giving shareholders gains again.
Acorda Therapeutics dropped 9% after the biotech specialist in multiple sclerosis, spinal cord injuries, and other nervous-system disorders said it would offer convertible notes to raise capital. Acorda said that it would raise $300 million by issuing seven-year convertible senior notes. Pricing of the note offering hasn't happened yet, but the fear that investors have is that the conversion option will potentially dilute existing shareholders, especially if the stock is able to reach its full potential. Nevertheless, for companies whose best prospects lie well in the future, raising capital is a necessary risk that early investors run in exchange for the possibility of getting huge profits.
Chicago Bridge & Iron declined 7% after facing allegations from a small research firm of using "creative acquisition accounting." Ever since Chicago Bridge announced that it had won a contract from a Canadian energy-infrastructure company to help provide front-end engineering and design work on a liquefied natural gas export facility in Canada, the stock has moved downward. Yet, with more attention than ever on engineering and construction projects, especially in the booming energy sector, Chicago Bridge & Iron has a true opportunity for growth if it can capture its fair share of business from companies both within and outside the energy industry.
Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends AeroVironment. The Motley Fool owns shares of AeroVironment. 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.