|Top Percentage Losers -- Wednesday, June 16, 2010|
|Company Name (Ticker)||Intra-Day Price||Intra-Day
|52-Week High||52-Week Low|
|Freddie Mac (NYSE: FRE)||$0.67||-45.1%||$2.50||$0.53|
|Genoptix (Nasdaq: GXDX)||$18.45||-19.4%||$39.00||$18.24|
|Nokia (NYSE: NOK)||$8.85||-9.9%||$16.00||$8.75|
*Table includes companies with minimum market capitalizations of $200 million and three month trading volumes of at least 100,000 shares. All percentage returns are listed as of 10:51AM Eastern Standard Time. Click on ticker symbols for up-to-the-minute price quotes and percentage gain data.
Nokia recedes Further
As we chronicled on Monday Nokia (NYSE: NOK) has been slowly drifting off course, first by losing any major presence in the United States, and then starting to see market share declines in its home European market as well. Sales growth has been a challenge, but profit growth has been a real bummer since the company chose to focus on low-margin phones.
Well, things are only getting worse. The Finland-based company just announced that mobile phone sales will be at the low end of guidance in the second quarter, and also acknowledged that market share erosion continues. Shares are down -10% on the news to levels not seen since 1998. Investors will need to wait until July 22 for a fuller explanation of the sales weakness, and any view into future quarters.
Action to Take --> Few would have guessed that this 1990s technology powerhouse would prove to be such a dud in the 2000s. Yet Nokia retains considerable assets such as a large cash balance, a large base of installed users, and a dominant presence in fast-growing emerging markets. When everyone throws in the towel on a stock, it’s a good time to look under the hood. Pay close attention to management’s revitalization plans when second-quarter earnings are released next month. As we’ve seen in the business, market share gains -- and losses -- can prove fleeting.
Genoptix’ Growing Pains
It’s been a forgettable spring for Genoptix (Nasdaq: GXDX). In early May, the maker of diagnostic testing kits for blood-related cancers disappointed Wall Street as sales and profit growth trailed forecasts. The company had been growing very quickly, and as it became apparent that growth was down-shifting from sizzling to "only" very good, shares took a big hit that day.
For investors, the question is whether these are natural growing pains as a company matures, or if the company has already reached market saturation. Growing pains is the answer. Genoptix has recently heavily bolstered its sales staff, but the new sales staff will need several more quarters to start gaining traction.
Genoptix also faces a more prosaic challenge. Its customer base of oncologists and hematologists is facing greater pressures to contain costs, and many may be looking to merge with each other. As these doctors consolidate into bigger physician practices, they may hold off on purchases in the near term. The company notes that the entire year will be a challenge.
Action to Take --> By 2011, these headwinds should abate, and profits should rebound back toward the $1.75 mark as the new sales reps carry their weight. The stock, which used to trade at 50 or 60 times forward earnings, now trades for around 10 times likely 2011 profits. If the company fails to deliver a robust rebound in 2011, then its large installed base of physicians would make the company an attractive buyout target for a larger diagnostics firm. There are no imminent catalysts to buy this stock, but it has likely found a floor today after falling sharply for the second time in two months. Considerable upside exists, but it may be a number of quarters before it is realized. Unless a suitor emerges before then.
The Beginning of the end for Fannie and Freddie
Shares of all entities associated with Freddie Mac (NYSE: FRE) and Fannie Mae (NYSE: FNM) are down sharply today on word that they will move from the New York Stock Exchange to the over-the-counter Bulletin Board. The quasi-government entities have been under duress for the past few years, and many legislators would like to abolish them completely.
Unless the housing market quickly turns up (which is unlikely in light of this morning’s dismal housing report), then the entities are likely to feel even more duress as non-performing loans build and further capital injections become harder to obtain.
Action to Take --> The sell-off may be tempting to bottom-fishers. But this looks like the beginning of the end, at least as an investable entity. Residing on the Bulletin Board, the only ones that stand to profit are the market makers that control the prices at which shares can be bought and sold. These market makers tend to keep wide spreads between the two, ensuring you will buy high and sell low.