Why Did My Stock Just Die? NII Holdings, Inc. (NIHD), Arch Coal Inc (ACI)

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Three out of the past four trading days have marked big moves higher for the Dow Jones Industrial Average (INDEXDJX:.DJI), putting the index within striking distance once again of the psychologically important 14,000-point threshold. Yesterday’s 99-point gain came up just short of being the fourth straight day of a triple-digit swing.

Arch Coal Inc (NYSE:ACI)Yet 70% of all the stocks listed on New York Stock Exchange moved up yesterday, leaving the three following companies to be among the more notable ones going in the opposite direction and leading the way down.

Company % Change
Arch Coal Inc (NYSE:ACI) (12.8%)
Baidu.com, Inc. (NASDAQ:BIDU) (10.1%)
NII Holdings, Inc. (NASDAQ:NIHD) (8.6%)

Now don’t go running over the cliff with them like a bunch of lemmings: It could just be a temporary situation. Let’s first see whether they had good reason to fall, as panic-fueled routs can sometimes lead to excellent buying opportunities.

In the line of fire
It’s true the coal industry is fighting for survival with one hand tied behind its back, as tough new regulations weaken demand for its output. But the larger problem is competing against natural gas, which itself is languid amid historically low prices but doesn’t have all the same baggage coal carries with it. Thus we find utilities switching from coal to gas to fire their plants, leading to lower production levels among the miners.

Arch Coal posted a wider-than-expected fourth-quarter loss of $1.39 per share, as revenues dropped 21% to $968 million. Sales volumes were down precipitously across all regions, with the Powder River Basin dropping 14% and Appalachia tumbling almost 30%, leaving it with little choice but to reduce production and close mines to try to match demand. Arch primarily sells thermal coal, though a small component is in the metallurgical coal market used for steelmaking.

Arch is looking for the uptick in gas prices here at home to help tilt the field in favor of power plants re-examining the benefits of coal usage. With colder winter weather gripping international markets — Moscow was recently hit with the heaviest snowfall in a century — U.S. coal exports ought to get a boost, too. Arch shipped 3 million tons of coal overseas in the fourth quarter, marking a record for the miner, but even it admits the number is likely to be lower in 2013 than last year. Thus, it remains difficult to generate any enthusiasm for the industry until there’s evidence coal really is recovering.

Searching for a solution
Despite holding a generally favorable opinion of China’s top search engine, Baidu, I recently expressed concern that analyst expectations for growth were much too rosy, particularly as rivals such as Sohu.com Inc. (NASDAQ:SOHU) and Qihoo 360 Technology Co Ltd (NYSE:QIHU) nipped at its heels.

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