Diamond Foods Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of snack-food maker Diamond Foods (NAS: DMND) were looking spoiled today as investors knocked shares down as much as 25% in intraday trading after the company provided an update on its ongoing internal investigation.

So what: Diamond's probe, which revolves around payments to walnut growers and related accounting policies, has already led to the delay of the company's acquisition of Procter & Gamble's (NYS: PG) Pringles business. On Friday, shares of Diamond were soaring after positive comments from a Wall Street analyst suggested that concerns over the investigations were overblown.

The company's update today calls that assessment into question, noting that the investigation will likely stretch into February and will cause the company to miss the filing deadline for its fiscal first quarter SEC filing.

Now what: When Mr. Market is freaking out and rushing for the exits, it's often a good time for more sober investors to move in and take advantage of his hysteria. Diamond in particular may be an interesting target to try to pick up on the cheap because for conservative, long-term-oriented investors, branded snack foods can be an attractive category. There's certainly the risk that this mess turns out to be even worse than it looks, but as the market continues to drag down the stock's price tag, investors are increasingly compensated for taking on that risk.

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At the time this article was published Motley Fool newsletter services have recommended buying shares of Procter & Gamble. 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.Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.

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