Why Staples, Dot Hill, and Cross Country Healthcare Tumbled Today

Even though the broader market managed to set another record high today amid signs of continuing improvement in the U.S. economy, these three stocks dropped substantially. Find out why these stocks missed out on the market rally.

Mar 6, 2014 at 8:31PM

Thursday brought more good news for bullish investors in the overall U.S. stock market, as major-market benchmarks mostly posted modest gains as the good mood on Wall Street continued to push most stocks higher. Yet, even with the direction of the broader market remaining up, many stocks didn't manage to share that positive mood, and Staples (NASDAQ:SPLS), Dot Hill (NASDAQ:HILL), and Cross Country Healthcare (NASDAQ:CCRN) were among those stocks that lost the most ground today, with earnings being the culprit for all three.

Staples saw its shares fall 15% as the office-products retailer posted extremely troubling fourth-quarter earnings results. Same-store sales dropped by 7%, leading to a 4% drop in overall revenue even after adjusting for last year's 53-week fiscal year, and sending adjusted earnings per share down by 28%. Pressure on operating margins contributed to the company's decision to close 225 stores, as more of Staples' business moves away from its bricks-and-mortar operations and more toward its e-commerce offerings. The good news is that Staples already has an impressive presence online, with about half its revenue coming from the e-commerce side of its business. As a result, it doesn't have to worry nearly as much about rivals poaching its business, like so many big-box retail stores have seen in recent years.

Dot Hill dropped 14% after the data-storage device maker's fourth-quarter report. On its face, the company's results looked reasonably positive, with adjusted revenue climbing 29% on particularly strong performance from its Vertical Markets segment. Moreover, for the full 2013 year, Dot Hill posted its first GAAP profit since 2005. But gross margins fell by more than a percentage point sequentially compared to the company's third quarter, and Dot Hill's guidance for the coming year include a range of earnings that tended toward the lower end of what investors had expected from the company. As the storage-systems business gets increasingly competitive, Dot Hill will have to work hard to keep its margins up as larger competitors pose a bigger threat to its business.

Cross Country Healthcare plunged 22%, as the medical-staffing company projected that it wouldn't be nearly as profitable as investors had hoped. Even after adjusting its fourth-quarter loss to remove one-time charges, the company still lost money during the quarter, falling short of the small profit that analysts had expected. Sales also fell short of expectations, and in its first-quarter guidance, Cross Country Healthcare said that even though revenue would be relatively strong, adjusted profit margins before interest, tax, depreciation, and amortization would be just 1% to 2%. For an industry that has demographic tailwinds that should be helping companies like Cross Country, the news was discouraging to shareholders hoping for better future performance.

Don't lose patience with good stocks
It's no secret that investors tend to be impatient with the market, especially on down days. But your best investment strategy is still to buy shares in solid businesses and keep them for the long term. In the special free report, "3 Stocks That Will Help You Retire Rich," The Motley Fool shares investment ideas and strategies that could help you build wealth for years to come. Click here to grab your free copy today.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of Staples. 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."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

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.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

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.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information