Can These Stocks Rise From The Ashes?

By Billy Fisher | November 17, 2011 AAA

The volatility that has been present in the market has caused many companies to see wide fluctuations in their share prices during the past few months. In some cases though, the volatility has been attributable to company specific events. Here are four stocks in particular that have been knocked down and their prospects for getting back up off the mat. (To help you Identify these stock, read Battered Stocks That Bounce Back.)


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Overcooked
Shares of Green Mountain Coffee Roasters (Nasdaq:GMCR) plunged 39.0% on Thursday, following the company's fiscal Q4 results, which included lower than expected revenue. Green Mountain has seen its stock come under fire, since hedge fund manager David Einhorn took a run at the company's accounting practices last month. This sales miss has added fuel to the fire.

The sell off may be overdone, though, and investors acknowledged this point on Friday as the stock rebounded to the tune of 6.9%. Despite the revenue miss, the company's top line results were nearly double its prior year results and Green Mountain is projecting an additional 60 to 65% growth in sales next year. The company has rolled out K-Cups from Starbucks (Nasdaq:SBUX) and Dunkin' Brands Group (Nasdaq:DNKN), which could enable to company to grab an even larger share of the coffee market.

Shares of the investment bank Jeffries Group (NYSE:JEF) took one on the chin, following the bankruptcy of MF Global, as fears surfaced that Jeffries could be subject to similar damage from European government bond exposure. Jeffries has seen its stock price decline 25.0% since Oct. 28, the trading session that preceded the MF Global filing.

The pounding that Jeffries has taken is another example of bears being too quick to pull the sell trigger. The company has since revealed its PIIGS sovereign debt positions, which indicate that the company's exposure is relatively minor. (For more on Sell-offs, check out Sympathy Sell-Off: An Investor's Guide.)

Stormy Skies Ahead
Two companies that have absorbed big shots to the jaw, and may have a more difficult time recovering, are Netflix (Nasdaq:NFLX) and AMR Corporation (NYSE:AMR). Shares of Netflix have lost more than 60% of their value over the last three months. The company's announced price increases and failed Qwikster plans have enraged its customer base. Netflix is reeling as it lost 800,000 U.S. subscribers in Q3.

AMR shares have steadily lost over 70% of their value since the beginning of the year. The parent company for American Airlines checked in with a $162 million net loss for Q3 and a Morningstar analyst has said that the company could be headed for bankruptcy. I don't see things getting an easier for the company anytime soon.

The Bottom Line
When a stock experiences a significant sell off, potential investors need to determine whether they have come across a great buying opportunity or a value trap. My initial assessment of these four battered names is that Green Mountain and Jefferies will face less resistance in making up lost ground than will Netflix and AMR. Investors are still advised to conduct their own due diligence, when deciding whether or not to invest in these stocks or similar securities that have come under recent fire. (For more on determining whether there is valuing in these stocks, see Why A Falling Stock Is Not Always A Bargain.)


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At the time of writing, Billy Fisher did not own shares in any of the companies mentioned in this article.

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