The 2009 halftime show isn't a party for all investors. Despite the market's healthy rally since mid-March, several popular stocks have shed half of their value, if not more.
A lot of the carnage appears overdone, and I'm here to point out the cases of excessive pessimism. After all, if I wrote about some of this year's biggest winners last week -- pointing out how they are likely to be the biggest losers -- shouldn't this cut both ways? Can't some of the biggest bleeders during the first six months of 2009 bounce back in a major way?
I think so, and I'm going to single out a few of my favorite losers.
MGM Mirage (NYSE: MGM): Down 54% through June 30.
You don't see a lot of sympathy for MGM Mirage these days. The casino operator is in over its head with the abysmally timed CityCenter project in Las Vegas, and now even some of the earliest condo buyers want out.
Analysts see a loss this year and project an even wider deficit for 2010. Revenue is tanking. This isn't a good place to be if you're a leveraged company -- as most casino owners are.
However, this state of affairs ultimately leads to the question that opportunistic investors need to answer: Is MGM Mirage half the company -- or, in this case, slightly less than half the company -- that it was six months ago?
I don't think so. Things can still end horribly, of course. MGM Mirage has had to put more muscle behind CityCenter, and it's entirely reasonable for worrywarts to fear that a potential collapse of the CityCenter project behind its signature MGM Grand could bankrupt the parent.
However, even CityCenter's failure could have a silver lining for MGM Mirage and existing Vegas casino operators, as long as MGM Mirage has the financial backbone to survive the immediate fall. Think about it: If MGM Mirage can't complete CityCenter, it's hard to imagine anyone else successfully introducing a new condo or resort in the area. Those with existing properties on the market could benefit, once the economy finally does send more gamblers Nevada's way.
Life Partners (Nasdaq: LPHI): Down 58% through June 30.
It seems like a win-win on paper. Someone who needs money right away can sell a current insurance policy and accept a discount on what the life insurance contract will eventually pay out. Life Partners is a leader in these "life settlement" investments -- it has successfully completed nearly 100,000 transactions over the past 18 years.
Investors have been skittish this year, concerned about legal challenges to the secondary market for life insurance products. Those fears aren't unfounded, but Life Partners remains a very profitable company, with a chunky 6.8% yield to reward patient investors.
The company reports earnings tomorrow, and it's currently trading for less than eight times earnings. A strong report -- or, obviously, a disastrous one -- could make the stock move sharply.
JAKKS Pacific (Nasdaq: JAKK): Down 38% through June 30.
This toymaker hasn't been child's play for shareholders lately. The company has missed analyst profit targets in three of the past four quarters. It's in a legal squabble with joint-venture partner THQ over the renewal of its licensing deal with World Wrestling Entertainment (NYSE: WWE), which expires this year.
Perhaps more importantly, it doesn't have the hot top-charting toy as we head into the telltale holidays, something that has helped the company over the past couple of years.
Wall Street has been talking down the company's bottom-line prospects. It now sees JAKKS earning just $1.73 a share this year, less than the $2.19-per-share profit it was targeting just three months ago. JAKKS generated net income of $2.20 a share in 2008.
The value-minded investor should be salivating over a toymaker that's fetching just six times this year's projected earnings, though mending its licensing woes or rolling out a hit plaything is necessary to get the stock back up to its 52-week highs.
Bankrate (Nasdaq: RATE): Down 34% through June 30.
As the only interest-rate publisher that matters, Bankrate had a robust 2008. Its business overcame the meltdown in the financial markets. The housing industry's collapse may have dried up demand for new mortgages, but whipsawed investors still gravitated to the site to seek out steady, high-interest savings vehicles.
This year hasn't been as kind, and now analysts see revenue and earnings clocking in lower than they did last year. The end result is that the dot-com darling has seen its valuation contract, with a forward P/E ratio now in the teens. That makes for an attractive entry point for a stock that should come roaring back when the financial services industry recovers. Whether we become a country of borrowers or savers, Bankrate is there to light both ends of the candle.
JetBlue (Nasdaq: JBLU): Down 40% through June 30.
The value-priced carrier is feeling more "blue" than "jet" these days. It disappointed the market last month, when it printed 23 million new shares in a secondary offering at $4.25. Yes, the move was dilutive. And the price point is less than a quarter of where JetBlue was trading when it was a darling stock six years ago.
On the other hand, earlier this year, JetBlue posted its first profitable Q1 in four years. I'm also a fan of the airline. Given the choice, who wouldn't want to fly JetBlue with its relatively new jet fleet, unlimited snacks, and in-seat entertainment options that include three dozen satellite television channels and most of the Sirius XM Radio (Nasdaq: SIRI) satellite-radio offerings?
When the time comes for the travel industry to fly again, JetBlue will be leading the way.
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