Why Did My Stock Just Die?
Nov 17th 2011 6:12PM
Updated Nov 17th 2011 6:14PM
The markets plunged again yesterday as the European financial crisis unravels, but even though your stock took a nosedive, 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.
CAPS Rating (out of 5)
|Rambus (NAS: RMBS)||**||(60.6%)|
|CVR Energy (NYS: CVI)||****||(16.3%)|
|Western Refining (NYS: WNR)||*****||(13.5%)|
With the markets tumbling 190 points yesterday, or 1.6%, stocks that went down by even larger percentages are pretty big deals.
That's going to leave a mark
Yesterday's not-guilty verdict for Micron Technology (NYS: MU) and Hynix Semiconductor underscores just why you shouldn't become emotionally attached to your stocks. Investors in Rambus would routinely gainsay anyone who didn't completely support its contention that its intellectual property was infringed upon, and woe to those who thought the tech-licensing company was really just gaming a broken patent system.
Yet yesterday, the jury essentially agreed with that assessment and decided Rambus didn't have a leg to stand on and didn't meet the burden of proof. The decade-old lawsuit, which at times featured testimony from Intel (NAS: INTC) and Dell and had potential repercussions that would ripple throughout the industry, probably isn't over yet. Since the verdict was something of a split one -- 8-3 in favor of the defendants -- Rambus' lawyers might feel justified in appealing the decision and continuing to wage this legal battle against the chipmakers.
For now, Rambus investors are licking some pretty deep wounds as shares in the company tumbled. Rather than a treble-damages award approaching $12 billion, they have exactly nothing to show for their devotion.
Highly rated CAPS All-Star TSIF doesn't think Rambus should have been punished the way it was but understands that emotional investors invest too much hope in their stocks.
In the case of Rambus, Inc, they live and [breathe] by [their] IP and have little value without it. I don't know a fair price. IF an appeal gets entered on their behalf this might be a good up play at some point as the investors in court cases are big time speculators. A court case should be a non-book event unless you lose and have to pay out a huge award. The company filing the case should not have that much stock change.
Let's hear in the comments section below or on the Rambus CAPS page whether you think Rambus will be filing an appeal. Add the stock to your watchlist to see whether it can bounce back from this legal debacle.
A tarnished outcome
Oil refiners such as CVR Energy, Western Refining, and Marathon Petroleum (NYS: MPC) are reeling from the news that Enbridge will be buying the 50% stake in the Seaway pipeline owned by ConocoPhillips (NYS: COP) and reversing the flow from Cushing, Okla., to the Gulf coast.
Refiners have been profiting from the spread in oil prices between West Texas Intermediate and Brent crude. Because of a lack of infrastructure in Cushing, a bottleneck developed there, leading to an oversupply that was depressing oil prices and boosting refiner profits. Now with Enbridge's purchase, the bottleneck will be reduced and oil prices are surging to more than $100 a barrel. Bad news for refiners and consumers.
The higher oil prices could be alleviated if the Obama administration would approve the construction of the Keystone XL pipeline that would transport oil from Canada's oil sands to the Gulf coast, but it stands athwart the effort. TransCanada would have as much as 1.1 million barrels of oil a day flowing into the U.S. through the pipeline, and it would be coming from friendly neighbors to the north and not a hostile Middle East. But the State Department has punted a decision until 2013, even as Iran threatens to cut off oil supplies in the event of hostilities.
I'm sure that with 1,160 CAPS members weighing in on Western Refining, the 96% believing it would be able to outperform the broad market averages weren't solely counting on bottlenecks existing at Cushing. Similarly, with all but two All-Stars casting their lot with CVR for greater growth, they still think there's more to the story than just one pipeline.
Crack Spreads for CVI are wide as they take in WTI and Canadian oil sands due to the high complexity of their Coffeyville Refinery and put out over 50% gasoline. The addition of a second refinery location in Wynnewood, Okla with a throughput of 70,000 bdp will add some cashflows, but the margins may be smaller than their Coffeyville Refinery. Overall CVI is making some great moves and is currently undervalued.
Ready for a resurrection
Just because your stock has taken a beating, that 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. With CAPS, you can decide for yourself whether your stock ready to come back from the dead.
At the time this article was published Fool contributor Rich Duprey owns shares of Intel, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Western Refining and Intel and has bought calls on Intel. Motley Fool newsletter services have recommended buying shares of Intel, Dell, and TransCanada and creating a bull call spread position in Intel. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.
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