Can This Month's 3 Worst Stocks Be Next Month's Big Winners?

Education Management flunks out of the market's favor, goes on sale, and ExOne can't print up a better price.

Feb 11, 2014 at 6:35PM

No one wants to own a stock that's falling, but if you invest long enough, it's inevitable -- even the best investors have had their share of stinker stocks. But just because a stock is hurting today doesn't mean it's bound to drag your portfolio down forever. It's important to distinguish between stocks that are on their way to oblivion and those that are simply waiting for the right piece of news to soar again.

Today we'll look at three of the stocks with the worst losses on the market over the past month of trading. They might have just become great investments, but the reasons for their collapse might also have made them too dangerous for your portfolio. We won't know until we dig deeper, so let's get right to it.


Monthly Performance

Market Cap

P/E Ratio

Education Management (NASDAQOTH:EDMC)


$692.5 million



$453.5 million




$647.7 million


Source: Finviz, YCharts, and Yahoo! Finance .

Education Management
It's been a wild ride for Education Management shareholders, who started off with a stock worth about $5 last spring and rode it up to more than $16 by late fall, only to watch it crash back toward $5 through the end of the year. The for-profit educator's 45% haircut over the past month is only part of the hideous two-thirds drop its stock has suffered since Halloween:

EDMC Total Return Price Chart

EDMC Total Return Price data by YCharts.

It didn't help that the company issued an ugly slate of forward guidance while simultaneously posting a barely-there profit for its fiscal second quarter on the back of tanking student enrollments. Total enrollment is now 22% below where it was three years ago, but at least the numbers appear to be stabilizing. Will Education Management's smaller student body be enough to support its new share price? That will depend on a few factors, not least of which is an ongoing federal crackdown on for-profit education and its abysmal graduation rates. There might be a bounce in the future, but no one can yet say if it will be durable.
The market was excited about this discount e-tailer for much of 2013, but investors are over this year after getting sideswiped by weak earnings for the all-important holiday quarter:

OSTK Total Return Price Chart

OSTK Total Return Price data by YCharts.

Fool contributor Michael Lewis dissected the company's earnings report, and found that wound up spending far more on sales, marketing, and administrative costs than it had expected after several setbacks on search engines and in courtrooms. He noted that the company's forward P/E of 21 is attractive relative to a certain supersized but barely profitable e-tailer, but it's also worth noting that Overstock's price-to-free-cash-flow ratio is a relatively minuscule 6.9. Will that hold up over the course of 2014, especially considering that an uptick on this metric neatly corresponds with a big one-time bump in net income as a result of a tax credit? Perhaps not -- but it's the one stock on this list that doesn't look to be beset by significant threats before it arrives at real profitability. That makes it worth a second look for bold investors, if for no one else.

Tiny 3-D printing company ExOne has enjoyed a bounce over the last couple of days that pushed it down to third place for this month's worst losers. It's hard to keep 3-D printing stocks down, but there's a valid argument that ExOne never should have reached its ridiculous valuation in the first place; the company's price-to-sales ratio is still more than 15 after the drop -- well above average for the tech world. You could blame sector leader 3D Systems (NYSE:DDD) for precipitating the drop with its profit guidance downgrade, but the reality is that ExOne did this to itself when it reduced its revenue guidance for the full year:

XONE Total Return Price Chart

XONE Total Return Price data by YCharts.

The Motley Fool has been extremely bullish on the entire 3-D printing industry for more than a year, but you can exclude me from that optimism -- I think the sector is inflated by expectations of boundless growth from investors who refuse to consider the possibility of tougher competition. ExOne and the rest of its 3-D printing peers have yet to prove that they won't be left behind by industrial giants with deep pockets as their core technologies lose patent protection.

One long-term winner flying under the radar
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more insight into markets, history, and technology.

The Motley Fool recommends 3D Systems and ExOne. The Motley Fool owns shares of 3D Systems and ExOne. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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