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By Richard James

In this article I analyze five at-risk stocks that display the likelihood of plummeting in 2012. I chose these stocks due to their lack of competitive differentiation - specifically due to service and production costs or unique, inimitable products to thwart new entrants - and high and unjustified earnings multiples. A lack of defensible moat around the business and a lofty multiple could spell a sharp drop this year.

US Airways Group, Inc. (LCC) - Investment in major airlines is something which most investors avoid as a result of the tremendous impact the current recession has had on this industry. This hesitation toward resistance is wise when it comes to US Airways despite the promising news of a potential merger with the American Airlines parent company AMR Corp (AAMRQ.PK). This year US Airways is showing a -83.39% decline in earnings per share with a stock price that is still under $10, a share price which has remained low for the past three years. Major competitors like Delta (NYSE:DAL) and United Continental (NYSE:UAL) are still struggling with antitrust obstacles from merger efforts and the same could be possible for US Airways. The company is still struggling to fully integrate labor groups from its America West Airlines merger back in 2005. Even with the potential promise of a merger, all signs point to US Airways representing a stock which can still plummet further. On a valuation basis due to merger uncertainty and fuel prices, I see 20% downside from here.

JetBlue Airways Corporation (NASDAQ:JBLU) - Airline consolidation seems to be positively impacting the stock value of JetBlue as fewer airlines compete as a result of mergers and fewer flights become available to passengers. Combine this with higher seat prices as well as greater travel fees and it helps to explain the strong profits developed from the tripled increase in passengers for the company in fourth quarter profits. What investors need to watch for is the eventual decline in stock value JetBlue will experience when major airlines like US Airways, Delta and United Continental recover from merger investments and focus on dominating the airline market. JetBlue is reporting a very minimal decrease expected in fuel costs with $3.18 in the first quarter and $3.17 expected during the remainder of 2012, so the likelihood is operating expenses will still remain high during the year. With the stock price reaching a three month high of around $6 and the target price only predicted to be slightly higher at $7, this may be a stock to avoid before it plummets again. Shares could shed 20% from current levels amid renewed competition from larger rivals in its domestic market.

Game Stop Corp. (NYSE:GME) - Game Stop looks like a company quickly on the decline as major video game manufactures seek to capitalize on the success the business has had. The company experienced flat growth during this holiday season, seeing the sales of games rise only to be let down by the decline in console sales. The largest contributors for the potential to plummet in stock value can be found by major gaming companies such as Microsoft (NASDAQ:MSFT) and Nintendo which are looking toward internalizing game sales through the possibility of online services. Xbox Live services and products had a 9% increase and Nintendo is attempting to match this new opportunity of success with the development of the Wii U which should be available near the end of the 2012 shopping year. All of these indicators help to display the expected decline which can be associated with the Game Stop brand. With holidays in the rear-view mirror, sales could see continued weakness. I see the potential for a 20-25% drop on a valuation basis.

Netflix, Inc. (NASDAQ:NFLX) - Netflix once represented one of the most affordable solutions available to consumers interested in accessing some of the latest movies. The broad attraction of this type of service helped to bring significant success to the company with a skyrocketing stock coming close to $300 per share. In July of 2011 the company stock began to plummet as management started making poor financial decisions such as trying to split its video and digital services as well as announcing a boost in price which increased consumer cost by as much as 60%. This may seem like an astronomical increase to decrease the company's value but this price change was available considering its closest competitor of Blockbuster had collapsed, being bought out by DISH Network (NASDAQ:DISH), and its other competitor Amazon (NASDAQ:AMZN) offers only a limited selection of outdated titles. What makes Netflix a stock that could plummet is the announcement of a new competitor being developed by a growing collaboration of Verizon (NYSE:V) and Redbox into the streaming market. The 30 million active Redbox consumers matched with the 109 million wireless and 9 million broadband Verizon consumers creates an instant affordable competitor which may quickly outshine Netflix in 2012. Going forward, Netflix could see its shares shed 25% on a valuation basis.

Whole Foods Market, Inc. (NASDAQ:WFM) - Whole Foods represents a stock offering a unique investing danger which many investors have a tendency to overlook. If you were to look at financial results it would show significant growth with the business, displaying a 31.3% year-over-year growth with strong quarterly increases. Combine this with over 65% of major analysts identifying Whole Foods as a buy and this would seem to be a safe investment. What investors need to be wary of is seen with the two main factors which will potentially drop the value of this stock - the rising cost of commodities and the threat of well known competitors. Agricultural commodities appear to be increasing significantly as a result of a growing demand for foods to support a growing global population. As land resources decline and population increases this is resulting in a boost in agricultural commodity prices, an element which will directly impact Whole Foods profit margins. When you then look at major retail competitors such as Kroger (NYSE:KR), Safeway (NYSE:SWY), Fresh Market (NASDAQ:TFM) and Ingles Markets (NASDAQ:IMKTA) all seeking to benefit from organic demand, brand recognition favors the larger chain names. Whole Foods' richly valued shares could retreat 20% from current levels on the basis of valuation.

Source: 5 Stocks That Could Tumble This Year