12 Stocks Happy To See The Third Quarter End

by: Bill Maurer

We all know it was a bad quarter for stocks. The major indices in the U.S. were down about 10-12% each. International markets were worse, with some down twice that amount. A lot of people are happy that the third quarter is gone. In fact, I've highlighted twelve companies that are extremely happy to see it gone. All of these names are down about 30% or more, just for the quarter. And most of these aren't small cap names, some of them are quite large in fact.

A couple of these were included in one of my latest articles on stocks to consider when the market rebounds. So let's take a look at their performance and then talk about why they did so bad.

Stock Mkt Cap. 6/30/2011 9/30/2011 change
FSLR $5.46B $132.27 $63.21 -52.21%
SODA $649M $60.81 $33.05 -45.65%
CRR $2.37B $162.72 $102.53 -36.99%
RIMM $10.57B $28.85 $20.30 -29.64%
HPQ $44.61B $36.21 $22.45 -38.00%
NFLX $5.95B $262.69 $113.27 -56.88%
WLT $3.75B $115.61 $60.01 -48.09%
FCX $28.86B $52.66 $30.45 -42.18%
BAC $62.02B $10.95 $6.12 -44.11%
MCP $2.76B $61.06 $32.87 -46.17%
SINA $4.70B $104.10 $71.61 -31.21%
MGM $4.54B $13.21 $9.29 -29.67%

First Solar (NASDAQ:FSLR): It was not a good quarter for the solar industry. When First Solar reported its latest quarter in early August, it missed estimates by a wide margin. This was especially surprising since investors are used to First Solar beating by wide margins. More troublesome was the guidance the company issued. First Solar lowered the following full year estimates: Revenues, operating income, EPS, capital spending, manufacturing and factory start up costs, and operating cash flow. Most of this disappointment had apparently been priced into the stock, as it only fell 2% the next day after it announced. However, it has yet to see those levels again. Despite some positive news out later that month (see my article here) a bankruptcy and FBI raid on fellow solar company Solyndra scared investors out of the entire sector. When First Solar announced that it couldn't reach a debt covenant for a Department of Energy loan for one of its projects, the stock dropped even more. Questions about the company's future have been circulating lately, and it appears that a flock of buzzards is circling overhead. While solar was once touted as the next great energy source, it appears that this sector has lost a lot of its shine.

Sodastream (NASDAQ:SODA): The maker of the at-home soda machine took a devastating tumble in mid-August after its earnings report wasn't as great as many hoped for and a less than encouraging conference call sparked fears of management confusion. The stock tumbled 40% on the day of the earnings release, and lost over 50% of its value in just 10 days. While the stock has rebounded a few times since then and has been extremely volatile, it fell below its mid-August lows on Friday before rallying a little. This was one of those stocks that was priced for perfection, a high growth company that needed to always be above the bar. Last quarter, its face hit the bar. The next quarterly report will be vital as it probably will signal which way the stock is going to move going forward.

Carbo Ceramics (NYSE:CRR): This is an oil and gas equipment and services company that provides oil and gas well equipment as well as computer software that helps in the drilling and fracture processes. The company's latest quarter was good, but apparently not good enough, as investors with growth concerns have sold the name over concerns about future U.S. energy production. Building fears of a recession have also chipped away at the stock, which is at its lowest levels since January.

Research in Motion (RIMM): The maker of the Blackberry and several other devices now had a very bad quarter. The stock was actually up 2.5% on the quarter going into earnings, but RIMM seemed to miss estimates on every product. Its margins took a dive, one of the reasons I questioned the company's ability to turn it around. The stock has lost another $3.50 plus after its earnings freefall, and currently sits just 30 cents above the $20 level. If that level is breached, I see more pain coming, and quickly. As much as people have called RIMM a takeover target for years, management may want to start exploring that soon. Now that Amazon (NASDAQ:AMZN) has entered the tablet space, another competitor is the last thing RIMM wanted to see. They could attract some serious buyers at these levels, and it's better to sell at $25 or so than to wait and sell at $10.

Hewlett Packard (NYSE:HPQ): RIMM at least had a direction, but its strategy wasn't working. HP on the other hand, had no direction this quarter and it showed. A 38% loss for the quarter is unheard of for a big name tech like this, and it forced the company to replace its troubled CEO. The company doesn't need a new strategy now because at the moment, it doesn't have one to begin with. New CEO Meg Whitman is another interesting choice, and it will be up to her to adapt to HP's business. The stock initially popped on news of axing Leo, but has returned to pre-news levels. If HP does spin off its PC business, it will be a dramatic shift for the company. Right now I'm just not sure what HP's plan is, or if it knows either.

Netflix (NASDAQ:NFLX): Another example of a high growth, priced-to-perfection stock that saw its bubble burst. Netflix announced earlier in the year plans to change its pricing structure and plans to allow customers to choose DVD only, streaming only, or both. If customers only chose one service, the price wouldn't change. But if they wanted both, it would go up. Everyone waited to see how this would impact Netflix's subscriber base, and we got an idea a few weeks ago. The company lowered end of quarter guidance by a million total subscribers to 24 million, and that was a killer. The company lost 1/3 of its value within a week, and has been hitting new lows ever since. Add in the fact that Netflix has been unable to reach a new deal with Starz, and investors have headed for the exits. Although it has acquired some new content lately, all eyes will be on Netflix's guidance when the company reports in a month or so. Like I said in my article, good things are ahead, but serious questions remain.

Walter Energy (NYSE:WLT): Walter Energy had a bad quarterly report, and fears of a recession have continued to haunt this metallurgical coal company that supplies the steel industry. Costs were up 157% year over year, and both revenues and EPS missed by large amounts. The stock fell 30% initially on the news. A few weeks later, rumors of a buyout sent shares up nearly 30%, but they quickly cooled off. The stock is now near a 52-week low, down another $15 plus since the day after its earnings report. Fears of a recession will only hurt this name even more, but coming out of a recession, this is a great name to be in. Don't buy it hoping for a takeover though.

Freeport McMoRan (NYSE:FCX): This miner, whose business is primarily copper, has seen its shares tank along with the price of the metal. The drops in gold and silver haven't helped either. Just this week, workers at one of the company's mines in Peru went on strike, and the mine is the 3rd largest copper mine in Peru. Expect shares to remain under pressure until we get some stability in the metals market. With copper likely heading towards $2.75, I'd wait before getting into this one.

Bank of America (NYSE:BAC): The worst performing stock in the Dow during the third quarter, easily beating out HP by a few percentage points. The bank is still having problems with its mortgages and a spinoff of its Countrywide business could be a huge help. The management shakeup announced during the quarter was needed, and not much of a surprise. The job cuts were also expected, as most of the large struggling banks have done so. The Warren Buffett investment was a short term positive for the stock, but that rally fizzled in a matter of days. Until BofA gets its problems under control, and Europe improves, I would probably stay away from this name. However, it's getting to the point where it is a really tempting long term value play.

Molycorp (MCP): The leader in rare earth mineral mining has seen its shares plummet as fellow commodity prices have dropped and recession fears have questioned demand issues for these minerals. Rare earth prices have come down, which caused the stock to be downgraded a few weeks ago. In addition, a price target cut from $105 to $66 sent shares spiraling downward more than 20%, and they've lost another 20% since then. At a forward P/E of less than 10, the shares are starting to look quite appetizing, but I've always seen this stock as a trade and not an investment. It moves quickly, so if you time it right, it can be quite rewarding.

Sina (NASDAQ:SINA): Shares of this China-based media and internet services company have taken quite a fall on competition concerns, Chinese censorship and regulation concerns, and this week's announcement that U.S. regulatory agencies are starting to look at Chinese companies for accounting fraud. The company has a Twitter-like service, but recent competition in the industry has sparked valuation fears on this high multiple name. Baidu (NASDAQ:BIDU) is a better name if you're looking to enter the space with the least risk, but for those willing to take a gamble, Sina could be in for a solid bounce if it falls into the low $60s.

MGM (NYSE:MGM): Shares of the casino operator have been hit this quarter over China slowdown fears. These fears have prompted analysts to cut their price targets for the stock based on the fact that the company's holding in MGM China is losing value rapidly. The sector took a huge hit this week, with MGM falling 10% and its competitors following suit. This company is still not profitable yet and has a large amount of debt, so if you want to enter this space, my pick would be Las Vegas Sands (NYSE:LVS). Look for my article on this sector shortly.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in MCP, SINA over the next 72 hours.