Stocks that could drop 50% during 2008
Posted
Jan 01 2008, 05:39 PM
by
Douglas McIntyre
It is not unusual for stocks to lose half of their value in a year. Certainly a number of financial shares like Countrywide and MBIA did it over the last few months. And other firms which have lost market share, as AMD did in the chip business, have taken very big tumbles since the beginning of 2007. All three of these companies could fall further if they do not begin to post better financial results.
These companies are part of a list of ten stocks which could fall by half in 2008. This list includes companies whose stocks were inflated because they are in hot markets like China. That puts Baidu and LDK Solar into the category of shares which could fall if the big Asian economy slows.
Some of the other shares that may fall are from companies in badly damaged industries like autos and newspapers. That includes Ford and Journal Register. The 24/7 Wall St. in-depth look at those companies is available in a longer article. The list contains an IPO from 2007, VMWare. It is in an attractive sector of the software market, but competition is heating up from companies including Microsoft, and the value of the company may have gotten ahead of itself.
Citigroup is a stock that could fall by half. The amount of the write-downs that the bank may face for the fourth quarter of 2007 is still unknown. Citi may have to raise more money, which could cause substantial dilution to current shareholders. Some Wall St. analysts also believe that the bank may have to cut its big dividend to preserve cash.
The tech sector is filled with stocks that do well, but some companies which are in promising sectors have simply failed to capitalize on the chance to pick up market share. PMC-Sierra sells semiconductors to the telecom industry, but it has let competition move in. This has hurt revenue. Micron Technology, which is in the memory chip business, has watched price competition in its field push down prices of some of its products by more than a third.
There is one other category of companies that should be watched. When the press questions a corporation's business practices or the way that management handles operating the company, it is very hard for those shares to keep their footing. That happened to Bidz.com when Barron's started to ask hard questions about the company. It will take more than a few weeks for investors to forget that Bidz is being watched by the media.
Contrarians would argue that a stock which can fall 50% is probably volatile enough to rebound on the first sign of good news. That may be true, but it is a dangerous game to guess when an outside event might help a company's share price.
