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Tickers in this Article: KEY, EXM, NTGR, PPC, DRYS
Seemingly large share price declines can often be a small price correction that could be due to many factors, such as overall movement of the industry, sector, or market as a whole. For a long-term investor looking to find an entry point, these short-term price pull backs are often a blessing in disguise.

That said, a serious decline can also signal something much worse. In other words, any time one of your stocks takes a plunge to lower price levels, you should probably ask yourself, is there something fundamentally wrong with the underlying company? This is what needs to be explored when looking at a company that has had a bit too much taken off the top at the last visit to the accounting barber. (For further reading, be sure to see our article Surviving Bear Country.)

On that note, here are five stocks that have recently experienced a large one-week decline in share price, but still have bullish sentiment in the Stock Picking Community. By exploring them further, and by trying to determine what caused their drastic declines, we can be in a better position to help predict whether the haircuts will continue.

The Bear Cave

Company
One Week Loss*
Community Sentiment
KeyCorp
(NYSE:KEY)
29.1%
100% Bullish
Excel Maritime Carriers
(NYSE:EXM)
18.6%
100% Bullish
Pilgrim\'s Pride
(NYSE:PPC)
14.7%
67% Bullish
DryShips
(Nasdaq:DRYS)
14.0%
82% Bullish
Netgear
(Nasdaq:NTGR)
12.2%
92% Bullish
* Data as of market close June 16, 2008

Chicken Still Won't Fly
As a follow up to last week's Five Big Bears Ready To Roar, this week we continue to look at chicken producer Pilgrim's Pride, which, as learned last week, had declined over 20% on an analyst report saying that its strategies of cutting production will not be enough to increase the cost of product itself, and thus offset the massive increases that have been seen in feed prices.

Pilgrim's Pride continued to decline this week, dropping almost 15% from last Monday's adjusted close of $19.75 to finish at $16.84 by the end of trading yesterday. With feed prices reaching all time highs, chicken producers are finding it very hard to make any profit in the current environment. Corn reached a record $7.37 a bushel last Friday, as flooding continued in the Midwest United States.

Robert Moskow, a Credit Suisse analyst predicts that a rise to $8 a bushel is very realistic. Moskow downgraded Pilgrim's Pride to 'neutral' from 'outperform' yesterday, stating that the company is "having a hard time seeing how the fundamentals can work for protein producers over the next 12 months given this environment." Share prices dropped almost 11% on Monday. Downgrade after downgrade of this stock has created share price losses of about 37% for the month. (For further reading on analyst expectations, read Analyst Forecasts Spell Disaster For Some Stocks.)

Chicken producers such as Pilgrim's will most likely not be seeing any light at the end of this tunnel for some time to come. With a slowing U.S. economy and inflationary pressures coming from global commodities outside of America's control, it could be quite difficult to put the brakes on this rampant inflation of prices. Food and energy prices continue to be driven by an ever increasing global demand. Raising interest rates - the Fed's main method of stemming inflation - may only decrease inflationary pressures within the borders of the U.S.; and in reality, other than food and energy, this inflationary pressure is pretty much non-existent in a slowing consumer economy. I ask - how would raising the Fed funds rate in the next meeting slow down growth (and thus the need for energy and food) in say China or India? The answer in short, is that it won't.

The only cure for the chicken producer's ailments will be to increase the demand for its product. This is why feed costs have gone up - the demand for corn has increased. As I had mentioned in last week's commentary, by increasing the demand for chicken, producer's across the globe could benefit from a higher chicken cost, which in turn may mitigate some of the losses they have been experiencing lately. If not, until corn prices level off, I am agreeing with analysts across the industry by saying steer clear of these birds. The economic bird flu is just as deadly as the real thing. (To learn more about the relationship between supply and demand and how it affects prices, could out our Economics Basics tutorial.)

Editor's note: After the time of writing, Pilgrim's Pride closed down another 5% on Tuesday's trading, to end the day at $15.98.

Add Your Two Cents
What do you think will happen with Pilgrim's Pride going forward? Will corn prices eventually level off, allowing chicken producers to save their margins, and escape the relentless downgrades we are seeing on a weekly basis? Be sure to join me (aytonmm) in the Free Stock Picking Community to share your thoughts and see what other investors are saying.

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