2011 has been an incredibly choppy year, the economy is flirting between snail-paced growth and recession, and many companies and entire sectors are experiencing some severe business pressures or their management teams have made severe missteps. We wanted to identify the worst of stocks of 2011 based upon year-to-date performance that fit within liquidity and size parameters.
Many investors might have guessed that Aeropostale, Inc. (NYSE: ARO), Bank of America Corporation (NYSE: BAC), Research In Motion Limited (NASDAQ: RIMM), and The Talbots Inc. (NYSE: TLB) are among the worst performers. Their performance has been atrocious, but the Finviz screener showed many companies which have performed far worse.
There are many companies under $100 million in value or which are illiquid which have fallen even more. This group was focused on companies that trade with a market capitalization of more than $100 million and we screened out the companies which are either not liquid of roughly 200,000 shares a day. We also screened out the Chinese companies and their accounting woes, with one exception. This list of doozies here also had one critical threshold: the stocks are all down by 75% or more from the start of 2011.
American Superconductor Corporation (NASDAQ: AMSC) has become the boulevard of broken dreams for investors. The trouble goes even beyond alternative energy woes. It is suing the Chinese customer who refused to pay, but the ongoing issue is that the customer was just too large of ASC’s customer base for it to adequately hedge against. At $5.22, the 52-week trading range is $5.10 to $38.88. That might make some people cry. Shares are down more than 82% from the start of 2011 and the performance has been only red. The market cap is still amazingly about $265 million and it usually trades more than 1.2 million shares each day.
Camelot Information Systems Inc. (NYSE: CIS) came public last year in October and investors probably wished they never heard of the enterprise application services and financial industry information technology services player in China. A slowing bank spending climate hurt there even before Americans had to throw almost anything related to China in “the accounting soup” during this last summer and before. Camelot trades close to $4.65 and the 52-week trading range is $4.00 to $28.18. The stock is still worth more than $210 million and the shares are down right at 80% so far in 2011. Camelot trades close to 800,000 shares a day.
Frontline Ltd. (NYSE: FRO) is a Bermuda-based shipper that transports crude in very large crude containers and it also transports coal and iron ore in vessels that its owns or leases. Its business model is such that analysts expect losses in 2011 and in 2012. It has slashed its dividend and shrunk the operation’s footprint. Frontline trades at $6.02, its 52-week trading range is $5.72 to $29.47, and its market cap is $468 million. Frontline also trades more than 2 million shares a day on average. Unfortunately, this one is down about 76% year to date.
Motricity, Inc. (NASDAQ: MOTR) has technically fallen out of the $100 million market capitalization rate, but only since yesterday. What is so sad here is that this was a mid-2010 IPO that rallied handily toward the end of 2010 when shares briefly hit $30.00. That was then for the mobile ad solutions provider aimed at allowing ad agencies to better focus on the mobile market. You hate to see a stock come public, ramp higher, and then fall to $2.00 the following year. The company is expected to lose money this year and next year. At $2.12, the 52-week trading range is $1.85 to $31.95, and its market cap is $96 million after a 4% drop on Monday. The stock’s average volume is about 2 million shares per day. This one leads the pack of post-IPO losers as it is down 89% year-to-date in 2011.
SemiLEDs Corporation (NASDAQ: LEDS) designs and manufactures light emitting diodes chips and components used in many lighting settings. Unfortunately, the promise of growth in lighting efficiency peaked and 2011 has so far been a very rough year for this company and its peers as even the industry leaders have had many warnings on their revenues and earnings. At $4.51, the 52-week trading range is $4.16 to $32.12. It also trades about 200,000 shares per day and the market cap is roughly $123 million. You could joke that SemiLEDS went dark in 2011 because the stock is down 84% year-to-date.
MGIC Investment Corporation (NYSE: MTG) should be called “Black Magic” rather than “Magic” these days. With new mortgage applications so low and with the private mortgage insurance sales being so soft in home mortgage lending, what is there to love here? The question is whether or not it can get to profitability before the business erodes out from under it. That this used to be a $70 stock no longer matters as no one expects that to ever be the case again and finding any great prospects in this housing market is more than difficult. Shares are now down to $2.36 after another 5% drop on Monday, but the 52-week trading range is $1.59 to $11.79. MGIC still trades more than 7 million shares a day on average and the market capitalization is almost $475 million. Shares are down more than 76% year-to-date.
Before you get too far down on stocks over poor performance, we have noted time after time that many value fund managers review the list of 52-week lows as one of the first tasks in their value screens. Not all losing stocks die, but finding value in highly troubled businesses is often more than challenging. As you have guessed, none of these stocks fit in as value stocks as they have underlying trouble in their businesses. Sometimes “cheap stocks” are not really cheap.
JON C. OGG