The CAPS Screen: Stay Away From These 5 Financial Time Bombs

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Sift through the wreckage of beaten-down companies, and you'll likely find a few wonderful stocks. Lately, the stock market has blessed patient investors with plenty of thrashed financial companies.

But the savviest investors know that willy-nilly contrarianism isn't a sure path to riches. As financial disasters Countrywide Financial (NYSE: CFC) and Thornburg Mortgage (NYSE: TMA) illustrate, companies often get punished for all the right reasons. And in those cases, their plight can be as bad as you think, and worse.

With that in mind, I used our new Motley Fool CAPS screening tool to find beaten-down financial stocks that the online CAPS community loves to hate. These are the stocks CAPS players avoid like the plague.

They are also:

• Capitalized at more than $200 million.
• Down at least 25% over the past year.
• Rated one star, the lowest possible rank, by our CAPS community.

Remember, in the first year for which we have data, one-star companies flamed out with an average loss of nearly 17%.

Company	Share Price	Market Cap	Price Drop
Ambac Financial (NYSE: ABK)	$1.91	$548 million	(97.8%)
Fannie Mae (NYSE: FNM)	$22.34	$21.8 billion	(65.8%)
Lehman Brothers (NYSE: LEH)	$22.80	$12.6 billion	(69.9%)
Merrill Lynch (NYSE: MER)	$34.54	$34.0 billion	(58.7%)
Washington Mutual (NYSE: WM)	$5.96	$6.3 billion	(86.0%)

Data from Motley Fool CAPS and Yahoo! Finance as of June 23. Price drop calculated from 6/29/07 through 6/23/08.

Are these companies poised for a turnaround? Or is the pain just beginning? Come and join us at CAPS to let us know what you think. Our 110,000-strong (and counting) CAPS community wants to hear your opinion.

More CAPS content:

• Is It Time to Sell?
• The CAPS Screen: 5 Financial Powerhouses
• Contrarian Shopping List