Deathbed Stocks Revisited

Over the past 10 months, we've been chronicling companies that appear to be on their deathbeds. As we note, not every company will give up the ghost, but since that original column, quite a few have done so, one way or another, including: Fannie Mae, Merrill Lynch, Lehman Brothers, Bear Stearns, and Washington Mutual.

What we do is check for stocks that savvy investors in our Motley Fool CAPS community of more than 120,000 members have given the lowest rating -- one star -- and then pair that information with various financial ratios that flash like a neon sign if the end is near.

The reason we choose one-star stocks is that over the first 20 months of the service's existence, CAPS data showed that the lowest-rated companies fared worst. The tales of woe left by the companies that have appeared in this column underscore that.

Now that a third of those original companies have in some way disappeared, let's take a look at another group of stocks that were deemed to be failing, thanks to their one-star CAPS rating.

Stock

Price at First Appearance

Last Close

% Chg

Acorda Therapeutics (Nasdaq: ACOR  )

$26.05

$17.85

(31.5%)

ArthroCare

$39.23

$19.03

(51.5%)

Biodel

$13.56

$2.02

(85.1%)

Blyth

$20.60

$6.99

(66.1%)

Churchill Downs

$46.24

$32.31

(30.1%)

Daimler (NYSE: DAI  )

$78.63

$27.22

(65.4%)

Dot Hill Systems

$3.66

$1.15

(68.6%)

Hythiam

$3.02

$0.65

(78.5%)

MTR Gaming

$6.45

$1.70

(73.6%)

Odyssey Marine Exploration (Nasdaq: OMEX  )

$4.84

$3.31

(31.6%)

Simon Property Group (NYSE: SPG  )

$88.90

$63.94

(28.1%)

Spire

$18.70

$8.07

(56.8%)

Thoratec (Nasdaq: THOR  )

$16.44

$20.08

22.1%

TrustCo Bank (Nasdaq: TRST  )

$9.86

$11.16

13.2%

UltraShort QQQ ProShares (AMEX: QID  )

$50.09

$68.85

37.5%

Even with the outsized performance of the ProShares exchange-traded fund, these stocks have fallen an average of 40%. Having fallen nearly the furthest, health-care services management company Hythiam does seem to be on the edge of oblivion, based on price alone. Thoratec, on the other hand, initially got a huge boost from a quarterly earnings report in August, but then lost as much as a quarter of its value recently when it said some of its implanted heart pumps had a problem that requires surgical replacement.

Whistling past the graveyard
With malls turning into ghost towns as the retail sector takes a scary turn, it's no surprise to find mall operator Simon Property Group on a list of stocks that have found their way into sick bay. With mall vacancy rates at their highest levels since 2001, it's no wonder that top-rated CAPS All-Star Tastylunch recently wrote about Simon.

Simon Property Group owns a lot of mediocre shopping malls and has debt to equity of nearly 7 to 1. It's trading at 11 times book and has seen [its] earnings drop by over 50% already yoy. I believe [it] may be two quarters away [from] the verge of running a loss if xmas [ends] up being especially bad. Shopping mall vacancy rates are at an all time [high] and I expect them to get higher as [a result] of the worst retail environment in decades.

If that's not a recipe for disaster I don't know what is.

Speaking of disasters, I've never quite understood the logic that the booty that sinks to the bottom of the sea in a shipwreck belongs to some long-ago people. Odyssey Marine Exploration finds itself involved in several legal battles over gold it has raised, such as the 17 tons of gold and silver coins from the wreck of a Colonial-era ship that, Peru claims, was owned by the Incas. Certainly, property rights aren't ephemeral, but without Odyssey's efforts, those ducats would still be homes for barnacles.

CAPS member foolpeterka stills sees value in Odyssey, if and when things are settled.

The event that takes the longest time is the legal issues. Who owns what, where, when. They [Odyssey have] an excellent legal staff and will win out over time. Millions of dollars and [doubloons] involved, so I see big increases at the end of each trial phase.

Rattling the cage
I'll be back next week to identify more stocks like these. In the meantime, it pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made -- all from your favorite stock's CAPS page. Sign up today, absolutely free, and let us know whether you think a stock is headed for demise.

Try any of our Foolish newsletter services free for 30 days.

Fool contributor Rich Duprey has no financial position in any of the stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.


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