It's been a banner year for stocks, with the S&P 500 index up a healthy 13 percent or so in 2010. Stocks recently hit a two-year high, putting them back near the levels of August 2008, right before the financial panic caused a nauseating plunge in the value of stock portfolios. Some analysts think the bull market will keep rolling right through 2011.
But like the overall economic recovery, the stock-market rally is an invitation-only party, and dozens of public companies continue to suffer the ravages of the recession that lasted from 2007 to 2009 and left 15 million Americans out of work. Analysis by Capital IQ, a division of Standard & Poor's, shows that about 200 public U.S. companies with a market value above $1 billion endured falling stock prices in 2010, many of them double-digit declines. The weakest performers provide a glimpse into the most troubled parts of the economy, where many firms are still grappling with the aftermath of the recession and wrenching long-term changes. Here are the 10 worst stock performers* of 2010:
Weyerhaeuser (WY) (stock price down 57 percent since the beginning of 2010). The fortunes of this lumber, pulp, and paper company are closely linked to the housing market, which has been felled by an epic bust. With revenue down more than 50 percent since 2006, Weyerhaeuser has been slashing costs and offloading divisions, and it also plans to change its corporate structure to lower taxes. As part of that restructuring, the company paid a "special dividend" in 2010, to compensate shareholders for the repositioning of the stock.
Dean Foods (DF) (down 54 percent) Frugal consumers and rising commodity prices have pinched profits at Dean, which sells a variety of milk and other dairy products. Premium brands have been losing ground to cheaper store brands, while the cost of ingredients like butterfat has spiked. Dean, which owns brands like Land O' Lakes, Silk, and Garelick Farms, has laid off 1,000 workers and plans to shave $100 million over the next few years.
H&R Block (HRB) (down 43 percent) Higher unemployment means fewer tax returns and more workers trying to save money by doing it themselves. That has crimped revenue at the nation's leading tax preparer, although a restructuring has helped sustain profits. The company's prospects are basically tied to an improving economy—quite uncertain at the moment—plus investors want to see stronger growth in sales of the company's do-it-yourself software.
Comstock Resources (CRK) (down 40 percent) Energy prices are notoriously volatile, and plunging prices for natural gas have hurt this energy company, which operates mostly in Texas and Louisiana. Strong energy companies protect against price swings by diversifying into various types of energy, but 94 percent of Comstock's proven reserves are in natural gas, which has fallen in price by about 55 percent since 2005.
Apollo Group (APOL) (down 36 percent) This for-profit education company operates the University of Phoenix, which offers relatively cheap online degrees and enjoyed a surge of business during the recession. But Apollo's financial practices have recently caught the attention of federal regulators—about the last thing investors want to hear. The government is investigating the possibility of insider trading and other violations, and some investors have filed a class-action lawsuit alleging false statements by company execs. Apollo says it did nothing wrong and is fighting the suit, but bad publicity has led to falling enrollments, and the company recently laid off 700 workers.
Diamond Offshore Drilling (DO) (down 34 percent) This oil-drilling company wasn't involved in the disastrous BP oil spill, but it was sure affected by it. Diamond contracts its services to big energy companies, and the Gulf of Mexico is one of its prime areas of operation. So this year's drilling moratorium, plus the possibility of new drilling restrictions in the Gulf, have darkened the earnings picture. Plus, rates for the type of services Diamond provides were soft before the BP spill, contributing to weak earnings and two dividend cuts this year.
ITT Educational Services (ESI) (down 33 percent) Business is good at this for-profit education provider, which operates about 125 technical institutions offering associate's, bachelor's, and master's degrees. But for-profit schools are suddenly drawing more government scrutiny, since students often rack up loads of debt—thanks largely to government-subsidized financial aid—and struggle to repay it. New regulations are possible, and some investors are even pursuing a class-action lawsuit against ITT Educational Services.
BancorpSouth (BXS) (down 31 percent) Profits at this Mississippi-based regional bank have plummeted thanks to real-estate loans that account for about 75 percent of its loan portfolio. The bank has tried to outrun the housing bust by diversifying into insurance and other types of financial services, yet its earnings have consistently fallen short of expectations.
SuperValu (SVU) (down 27 percent) Sales are down at this big grocery chain, which operates under names such as Shaw's, Acme, Albertson's, Shop 'N Save, and Shopper's, thanks to cost-conscious consumers and brutal competition from big discounters like Wal-Mart (WMT). The company has been closing some stores and restructuring, but pressure in this low-margin business remains intense. Investors are also skittish about a labor force that's heavily unionized and puts SuperValu at a cost disadvantage.
PulteGroup (PHM) (down 24 percent) Revenue for the year may finally improve from the dismal levels of 2009, but this home builder has continued to struggle as the housing bust drags on, with high unemployment and scarce lending severely depressing home sales. Pulte has made deep cuts to survive, and if it can stanch the losses in 2010, it will be the first annual profit since 2006. But with home values likely to keep falling in 2011, nobody's sure when the housing bust will truly end—or the future will brighten for home builders.
* Includes publicly traded U.S. companies with a market capitalization of $1 billion or more as of mid-December. Excludes companies whose stock price was affected by mergers, spinoffs, splits, or other such events. Based on stock prices through Dec. 22, 2010.
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Disclosure: No positions