Why Did These Stocks Just Die?
Mar 27th 2012 9:57PM
Updated Mar 27th 2012 9:58PM
Comments by Federal Reserve Chairman Ben Bernanke helped the market roar back to life yesterday. But with these companies going in the other direction, first let's see whether they had good reason to fall. Sometimes, panic-fueled drops can make excellent buying opportunities.
The markets jumped 161 points or 1.2% yesterday, so stocks that went down by large percentages are still pretty big deals. Here are two of stocks that fell that could provide a possibility for profit:
CAPS Rating (out of 5)
|BroadVision (NAS: BVSN)||*||(14%)|
|A123 Systems (NAS: AONE)||**||(12.4%)|
That's going to leave a mark
Yesterday's tumble by BroadVision is just the latest in a series of big drops the enterprise-level social-network operator has suffered since the beginning of the month, when it reported yet another quarter of lousy earnings. BroadVision's shares have fallen 44% in the past three weeks.
The company has seen revenues dropping in North America and Europe and only inching higher in Asia as a result of having some legacy products on the market there. Don't expect that to continue. Rivals such as Jive Software (NAS: JIVE) and Lithium are taking market share by the handful, sporting a client list that includes SAP, Accenture, and Hewlett-Packard. The Hail Mary play BroadVision is making on Clearvale -- software that allows businesses to connect to public social networks like Facebook or Twitter -- seems like so much desperation in comparison.
A few months ago, no one was paying attention to this company, yet as the Fool's Sean Williams has documented, it suddenly has bulls and bears with competing websites flogging the stock. It could help explain why almost 90% of the CAPS All-Stars rating BroadVision see it underperforming the market.
Add the social networker to your watchlist to see how much further it has yet to fall before it becomes an obscure company once again.
Running on empty?
Count me among those betting electric-vehicle battery maker A123 Systems will drive off the road into bankruptcy. Maybe not tomorrow or even by year's end, but I believe this company is going to crash and burn eventually. The $55 million battery recall it initiated is just the beginning of the end, burning up a quarter of its projected revenues for 2012.
The Fool's Travis Hoium calculated A123's operating cash burn at $251 million in 2011, nearly double its rate of the year before. As he notes, "Companies don't go bankrupt because they're posting net losses; they go bankrupt because they run out of cash." The battery maker will have to grow at almost 50% a year (assuming very generous 25% margins) to just turn cash flow positive. 'Tain't happening.
It has high-profile customers such as Fisker, General Motors (NYS: GM) , BMW, and Navistar, but many of them are on shaky ground as well. Fisker got cut off from government subsidies because it can't sell its cars (and A123 is an investor in the company, too) and GM's plans for tens of thousands of EV car sales was simply pie-in-the-sky thinking. Heck, it had to shut down production of the Volt for a few weeks because it couldn't move the cars it already had off dealers' lots.
Interestingly, we saw GM's Volt batteries catching on fire and then Tesla's (NAS: TSLA) battery failures turning its pricey sports cars into 2,700-pound bricks. So it suggests that the industry just isn't ready for prime time yet. You already have consumers doubtful of the value of high-priced EVs, and battery failure issues will only make them more hesitant to shell out big bucks.
That's why I'm expecting A123 to eventually go under. I believe this will only spin further out of control from here, so I'm maintaining my underperform rating on CAPS.
But you can add the battery maker to the Fool's free portfolio tracker to watch it succumb to its fate, or tell me in the comments section below or on the A123 Systems CAPS page why you believe that my thinking on this issue is short-circuiting.
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. Balance out the extremes by finding companies the will help you build a solid retirement portfolio. You can find them in The Motley Fool's report, "3 Stocks That Will Help You Retire Rich" This is a special free report that you can access right now -- it's free.
At the time this article was published Fool contributor Rich Duprey holds no position in any company mentioned. Check out his holdings and a short bio. Motley Fool newsletter services have recommended buying shares of Tesla Motors, General Motors, and Accenture. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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