Today's 3 Stock Picks: GT, STEM, PLD

Shares of Goodyear Tire & Rubber (GT) continued their weeklong skid Wednesday, as the main supplier to beleaguered U.S. auto makers continued to lose traction.

The company on Nov. 3 warned that it would be on the low end of capital expenditures for the year and is trying to hang on to cash as financing becomes difficult. Shares have plunged almost 50% since Nov. 4, and are down almost 80% in the past year. That closely mirrors the trajectory of Ford Motor (F) shares, down 80% for the same period. General Motors (GM), beset by rising fears of bankruptcy, has fared even worse over the same time span, with shares shedding 90% of their value.

On last week's conference call, Chief Executive Bob Keegan said rising commodity costs and falling demand for new cars and trucks continued to hurt Goodyear.

"Our industry continues to face serious economic pressures, and these pressures have intensified throughout the year," he said. "The segment results for the quarter reflect the economic reality of the weakened industry demand, primarily in North America and Europe, and the associated cost impact of the production cuts we initiated in the quarter."

Goodyear beat Wall Street estimates for its third quarter, reporting earnings of 43 cents a share, nine cents above analysts' consensus forecast. But good news from the Akron, Ohio-headquartered company can't blunt the impact of bad, bad news from Detroit. Shares of GM on Tuesday hit a 60-year low, and October auto sales plunged year over year.

Goodyear's emphasis on high-quality tires is also hurting its replacement tire business, as wary consumers trying to reduce expenses are opting for cheaper brands.

"The biggest issue with this company is that they supply OEM [original equipment manufacturer] tires to the auto industry, and the slowdown there has had a big impact," says Min Ye, an analyst with Morningstar. "They're so large in OEM, and even with their replacement tire business, how many people care if they're driving on a $100 tire or a $50 tire?"

Bottom line: Hold
Even a well-run company can't get a grip when its biggest customers are begging the federal government for a lifeline. President-elect Barack Obama has made clear signals of support for an auto maker bailout, which could help get Goodyear out of the ditch as well.

Shares of StemCells (STEM) failed to multiply Wednesday when the biotech company announced it secured another $20 million in financing.

The dilutive effect of the stock offering on shares, in combination with the broader market selloff, hit the Palo Alto, Calif., company hard, with its decline outpacing rivals such as Geron (GERN) and Cytori Therapeutics (CYTX).

The looming change in presidential administrations prompted a run-up in shares of stem cell-related businesses before the election, and prompted some optimists to put StemCells at the forefront of potential beneficiaries under an Obama administration. The outgoing administration of President George Bush put curbs on the use of embryonic stem cells from human embryos in 2001, and the field remains controversial.

The company last month announced positive results in an animal trial that showed stem cells might be able to halt vision loss.

But Reni Benjamin, a biotechnology analyst at Rodman & Renshaw, says that changes in government policy won't necessarily translate into success at private companies.

"A change in policy, which has already been hinted at by the incoming president, definitely bodes well for the stem-cell space," he says. "But what investors need to realize is that there's a difference between increased funding for research and increased funding for private companies that are developing therapeutics."

Analyst Paul Cohen of Cohen Research says Obama's tax policies may have more negative impact on private sector stem cell applications that could outweigh the benefits of any increased research funding for public institutions.

"Companies that are dependent on financings are going to be very much at risk" if Obama raises capital gains taxes, he says. "But I think he feels like there's no alternative -- he's damned if he does and damned if he doesn't."

Bottom Line: Buy
Biotech is always risky, and volatile, and StemCells still isn't profitable. But an end to curbs on an area of basic research will help the sector, even if it's not a direct boost.

The nexus of the national real estate and credit crunches claimed another victim Wednesday as shares of warehouse developer ProLogis (PLD) plunged following the resignation of its CEO. The Denver-based real estate investment trust said former Chief Executive Walter Rakowich would replace outgoing Jeffrey Schwartz, who also served as chairman.

ProLogis also said it would cease work on new projects and cut its dividend to save cash. Developments already underway would be completed, the company said.

"Going forward, however, the company does not expect any new development activity for the foreseeable future and will not pursue entry into any new markets until conditions improve and liquidity returns," ProLogis said in a prepared statement.

The company reduced its dividend for next year to $1 a share from $2.07, down from a projected $2.28 a share. "This action will permit the company to retain additional capital, which will be used to repay debt and strengthen the balance sheet," ProLogis said.

Mark Biffert, an analyst at Oppenheimer & Co., said the changes reflected fundamental shifts in thinking during a difficult economic climate.

"We believe the change at the top reflects the revised corporate strategy to improve liquidity, strengthen the balance sheet and focus on operations," he wrote Wednesday. "We have confidence that the current management team will be able to implement the necessary changes to strengthen the company."

Steven Feinberg, the company's new chairman, said the "economy [is] facing significant headwinds due to dislocation in the credit markets and the negative effect on business conditions around the world," and that tough decisions were needed to shore up ProLogis's position.

Bottom Line: Hold
Selling into weakness, particularly when a stock has lost about 70% of its value in a month, is a bad move. The dividend cut could prompt further selling, but giving new management a chance to turn things around may be the best of a few bad choices.