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The CAPS Screen: Avoid These 5 Financial Time Bombs

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 Washington Mutual (NYSE: WM  ) and E*Trade Financial (Nasdaq: ETFC  ) 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 the online CAPS community loves to hate. These are the stocks CAPS players avoid like the plague.

They're also:

  • Capitalized at more than $200 million.
  • Down at least 25% over the past year.
  • Rated one star, the lowest possible rank out of five, 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%.


Share Price

Market Cap (in billions)

Capital One (NYSE: COF  )



National City (NYSE: NCC  )



Regions Financial (NYSE: RF  )






Wachovia (NYSE: WB  )



Data from Motley Fool CAPS and Yahoo! Finance as of July 14.

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.

For more CAPS content:

Ilan Moscovitz has never skydived, nor does he own any of the companies mentioned in this article. The Fool has a daredevil disclosure policy.

Read/Post Comments (5) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 15, 2008, at 1:18 PM, MikeRehling wrote:

    Your comments regarding ETFC are too off base to comment on fully, but their sub prime was sold late last year. Their existing portfolio, primarily HELOC's, is more than adequately reserved for (go to FDIC.GOV for confirmation), and the company is well on the way to having over $1B in 'excess capital' over what is required to keep the bank 'well capitalized'. They have strong institutional ownership, and Citadel is a 20% owner. The NEW board, and CEO have stopped risky lending, focused on the brokerage and its strong brand, and have a first rate trading platform rated number one by almost every source. Lumping them in with WM is worthy only of a Fool!

    I own ETFC, am a customer, and my largest holding is BRK.B, so I am NOT a big risk taker. I DO my homework though and that is why I am comfortable. BTW, my worst investments this year came off the 'Fools' List! You are wrong again, and homework assignments are in order! Get over yourselves, you are better than simply making assertions with no recent facts. (Sale of Canada operation for $511MM in cash, and Q2 earnings coming next Tuesday)

    Let's keep tabs and see who the fool really is? Game on!

  • Report this Comment On July 15, 2008, at 5:29 PM, MiguelWipo wrote:

    I too felt your comments we're possibly biased and led incorrectly. This company has shown it's capabilites in these hard times and has proven it's worth. The only hangover it has now is psychological.

    I challenge you to name a list of reasons why ETFC is so bad. What is their long term problems at this point?

    What is their long term potential? Short Term?

    Who is rated the fastest growing brokerage? Who is rated the #1 trading platform? Who has almost 5 million users?

    You bring new meaning to FOOLS!

    Either your management has changed into them, or you think we are fools.

    I bet you are short and trying to namedrop negativity for manipulation.

    We're not idiots!!

    It's like Jim Cramer talking down ETFC while AMTD ads are on the screens behind him. We all know how the world works, how bread is buttered, how people are motivated.

    We're not children.

  • Report this Comment On July 15, 2008, at 5:31 PM, MiguelWipo wrote:

    I want to cancel my subscription to Motley Fools. You have finally sold out and are catering to your need to survive and be relevant.

    You have sold us out Fools!

    bye bye

  • Report this Comment On July 15, 2008, at 8:28 PM, Erlymorn wrote:

    This article is irresponsible at best, at worst, a pandering to the top brass who want to see certain financials kept low while others are bought in.

    You really want to know what "time bombs" there are, check out Fool's recommendations. Last I checked, Markel (MKL) their "golden" poster-boy pick has been tanking on a steady decline.

  • Report this Comment On July 16, 2008, at 6:39 AM, sdansker wrote:

    I'm sorry, but I can't show respect to an author that has had his head in the sand for the last year re ETFC. I can't think of ANY reason to continue to be negative on ETFC other than pure stupidity. In Cramer's words, now is the time to back up the truck & buy ETFC like there's no tomorrow. At the end of 2008, ETFC will be well-capitalized and well on it's way to show profits for years to come. Mark my words, unless dimwits like the author cause a panic withdrawl of deposits, this firm will be well into the teens by COB 2009. I challenge the author to bet me a cool million dollars that I'm right. Come on, Mr. Moskovitz, put your money where your mouth is.

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