5 Deathbed Stocks

We've all heard of the "death rattle," the dying sounds emanating from a lost soul's lungs as the end approaches. Think of the sound hook-and-loop fasteners make as they're pulled apart.

Sometimes, it seems as though the companies we invest in are giving off signs of their own that the end is near. Revenues dry up. Margins contract. Profits evaporate. It's a visual cue that their condition is worsening -- a financial death rattle, if you will.

Stocks in sick bay
Not all companies that plunge into the abyss will die. Some will linger in a nether state, while others bounce back to live another day. Kmart climbed from the coffin of bankruptcy to become part of Sears Holdings. Similarly, UAL, the parent of United Airlines, recrossed the River Styx to fly the friendly skies once more.

But what we're seeking here are companies whose breathing is so labored that, for all intents and purposes, they've given up the ghost. To find them, we turn to the 81,000-strong investor-intelligence community of Motley Fool CAPS.

Checking out the morgue
This investing platform assigns a rating to stocks and investors both: Stocks get one to five stars (five is best), and players get numerical scores up to 100. With a year's worth of data to test, the morticians digging through the information have found that stocks with the highest ratings did best, while those with the lowest fared worst. Yes, I know -- "Duh!" But we can begin to use this data to our advantage.

Below are a handful of stocks that are on the way down. These have recently moved from a low two-star rating down to the worst one-star rating. Are they suffering from a bad case of the flu, or is it the death rattle we hear?

Looking at the names on the list, you might be tempted to think that some need the ICU unit rather than a cemetery plot. And maybe not even that. Online jewelry auction site Bidz.com, for example, might not even need a Band-Aid, let alone a hospital bed. Look at its return over the past year and the 48% increase in third-quarter sales.

However, stocks that CAPS investors have marked down to one star are possibly destined to seriously underperform the market in the future, and Bidz's shares had taken a hit last November after an analyst questioned certain practices at the company. Management seemed to refute most of the charges to other analysts' satisfaction.

Nothing A-1 at Capital One
Delinquencies on consumer debt continue to rise, jeopardizing the soundness of financials at Capital One, American Express (NYSE: AXP), and Citigroup (NYSE: C). Capital One followed the other two in warning that things weren't looking all that rosy. For the third time in less than a year, Capital One lowered its full-year profit forecast, dropping it to $3.97 per share from $5. It also set aside nearly $2 billion for bad loans in the fourth quarter.

As the financial pain starts spreading out through the economy, top-rated CAPS All-Stars like kurtdabear feel the financial sector will be next to bear the brunt of it, and Capital One in particular will feel the pinch:

Credit cards will be the next Financial sector group to get wiped out. Though this stock is already down a long way this year, it appears to have plenty of room left to fall.

That's echoed by another All-Star, martynanasi, who feels in this pitch from about two weeks ago that it is Capital One's target customer who will ultimately be the company's downfall:

Very large credit card and lender of various sorts. Tend to lend to the sub-prime consumer which is not a good thing in this market. Too many issues with current standards right now to think this stock will outperform the market even though has a PE less than 7. I am guessing market thinks earnings growth is pretty dull going forward.

Rattling the cage
So are these companies doomed? Should we pay them our last respects? Will they go on to a period of time in pain and penury -- along with their investors? Or will they recover to shine again? On Motley Fool CAPS, you have the power to tell your fellow investors just how you feel. Sign up today -- it's completely free! -- and let us know whether you think the Grim Reaper is just outside the door.