The market's had a bit of a mean streak this month, but volatility alone isn't hazardous to your portfolio's health. I'm more concerned about the stocks that have been rallying over the past year and change, with little to show for it in terms of improving fundamentals.
Even as the economy shows signs of life, there are still plenty of companies posting lower earnings than they did a year ago. Let's go over a few of the pretenders expected to go the wrong way on the bottom line next week.
|
Company
|
Latest Quarter EPS (Estimated)
|
Year-Ago Quarter EPS
|
|
TiVo (Nasdaq: TIVO )
|
($0.16)
|
($0.04)
|
|
Sigma Designs (Nasdaq: SIGM )
|
$0.23
|
$0.30
|
|
Diana Shipping (NYSE: DSX )
|
$0.34
|
$0.47
|
|
Conns (Nasdaq: CONN )
|
$0.19
|
$0.51
|
|
hhgregg (NYSE: HGG )
|
$0.25
|
$0.42
|
|
Novell (Nasdaq: NOVL )
|
$0.07
|
$0.08
|
|
Sociedad Quimica y Minera (NYSE: SQM )
|
$0.27
|
$0.33
|
Source: Yahoo! Finance.
Clearing the table
More companies will post lower earnings next week, but these are just a few of the names that really jump out at me.
Let's start with TiVo. The stock got hammered this month after the DVR pioneer suffered a surprising setback in a long-running patent infringement case. However, next Tuesday's projected shortfall has nothing to do with courtroom tussles. TiVo has had a hard time retaining its subscribers.
I made TiVo the subject of my weekly "Throw This Stock Away" column a few weeks ago, when the stock tradied in the high teens. It's since shed nearly half of its value. If you haven't looked up a quote on TiVo lately, shares are back in the single digits. Opportunistic investors may be tempted to nibble at this point, but the company needs to start growing again to remain relevant.
Sigma Designs makes microchips that help drive home-theater appliances such as DVD players, high-def televisions, and other high-tech set-top gadgetry. Analysts see lower quarterly results on Wednesday -- a bit of a surprise, given the company's blowout quarter earlier this year.
Diana Shipping is a dry bulk cargo shipper. This may not be a very sexy sector these days, but Wall Street still expects Diana Shipping to eke out modest earnings growth for all of 2010. In this topsy-turvy market, Diana Shipping's earnings multiple has dipped into the single digits.
Conns and hhgregg are consumer electronics retailers. They should be on top of the world right now. A year ago, Circuit City was slashing prices on all of its merchandise in the mother of all consumer electronics liquidation sales. It's gone now, so even smaller players should be gaining market share.
Novell, the former networking software star, now finds itself on the auction block. It rebuffed an unsolicited buyout offer from a hedge fund two months ago. Now it's simply opening up the bidding process. The Wall Street Journal is reporting that as many as 20 different bidders may be fielding offers. This could get interesting, and next week's report may set the tone on how desperate Novell is to cash out.
Sociedad Quimica y Minera is a Chilean producer of specialty plant nutrients, iodine, and lithium. (Quimica and Minera are Spanish for "chemicals" and "minerals," respectively.) Fertilizer would seem to be an all-weather industry, but analysts expect this to be the company's fourth consecutive quarter of year-over-year declines on the bottom line.
Why the long face, short seller?
These seven companies have literally seen better days. The market has rewarded many of these stocks with healthy gains over the past year, but they still haven't earned those upticks.
The good news here is that Wall Street already expects these companies to deliver shrinking bottom lines. In other words, the bad news is already baked into the shares.
The more I think about it, the less worried I become.
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