These Stocks Are Worse Than Investment Brokerage Stocks

• Email
• Share
• Print

It's come as a shock to many investors that -- believe it or not -- there are stocks out there that beat aluminum stocks, petroleum stocks, and even alternative -nergy stocks. But here at the Fool, we're taking it to a whole new level -- in the opposite direction this time -- to unearth investments that have fared even worse than stocks consumed in the bloodbath of the financial brokerage sector.

Would the real losers please come forward?
The 5,500 stocks that more than 115,000 Motley Fool CAPS community members have rated include descriptive "tags" that group them with other companies sharing similar qualities -- a country of origin, a sector, or an end product, for example. Clicking the Investment Brokerage-National tag pulls up a list of 25 stocks that have lost 36% in the past year, much of that in the past month.

But CAPS tags can highlight stocks that have lagged even the staggering losses from the investment brokerage group: Major Airlines. This group consists of 16 companies that have grossly underperformed, with a 46.6% average loss in the past year.

Each group has exceptions to the norm, of course, and CAPS can be a great resource for zeroing in on potential opportunities in each area.

From macro to micro
For instance, here are a few of the stocks in the Investment Brokerage group:

Company	CAPS Rating (Out of 5)	1-Year Performance
Morgan Stanley (NYSE: MS)	**	(65.7%)
Goldman Sachs (NYSE: GS)	**	(38.5%)
FCStone	***	(53.1%)
TD Ameritrade (Nasdaq: AMTD)	****	0%

Sources: Motley Fool CAPS and Yahoo! Finance, as of Sept. 17.

Now, here's a sampling of Major Airlines stocks with their performance and CAPS ranking.

Company	CAPS Rating	1-Year Performance
US Airways (NYSE: LCC)	*	(73.5%)
AMR  (NYSE: AMR)	*	(52.9%)
Delta	*	(47.5%)
Southwest (NYSE: LUV)	**	7%

Sources: Motley Fool CAPS and Yahoo! Finance, as of Sept. 17.

Flying high, flying low
There's little love in the skies these days. Higher fuel costs of $1.1 billion drove US Airways to a huge $567 million loss in the second quarter, compared with a profit of $263 million last year. The major carriers are hanging on as fuel costs that have doubled over the past year eat into margins and have forced many small airlines to file for bankruptcy. The recent decline in oil prices has eased pressure on US Airways, but it still has high debt and high costs that might leave it on its deathbed.

Another concern from investors involves distraction -- as US Airways and other airlines remain focused on the struggle to stay afloat, the major carriers remain shortsighted on the future of travel. As they fail to meet the needs of the savvy high-net-worth and business travelers, their best customers are increasingly turning to private jets for travel as they become more viable economically.

The company had to raise close to $180 million in a new share offering last month and is thinking about turning to its credit-card partner Barclays for a big cash advance on all the frequent-flier miles piled up for the carrier. With all of the hurdles remaining in front of US Airways, only 47% of the 664 CAPS members rating the airline expect it to outperform the market going forward.

Shuffling the deck
American Airlines parent AMR reported that it lost $1.45 billion in the second quarter, mostly because of a writedown in the value of its jet fleet. Pinched by rising fuel costs while it still offers bargains to flyers, the airline has some analysts expecting it to continue losing money through 2010, as the prospects of an extended downturn in the economy become more real.

To "right-size" the business in this new climate, AMR plans on cutting 6,800 jobs and reducing capacity up to 13% to counter high fuel prices. Certainly, the airline needs more than this to become profitable, so AMR is trying to increase income by joining the crowd with all of those annoying extra fees for things like extra baggage and food.

But beyond addressing the human elements of its business, AMR is also replacing some of the fuel-guzzling planes in its fleet by picking up another six Boeing (NYSE: BA) 737-800s in 2010 and more in 2013. The plans to remove 30 planes (and another 37 regional jets) from service this year should help it combat rising costs, but it’s only enough to convince 52% of the 858 CAPS members rating AMR that the carrier will outperform the broader market.

Before you buy ...
Of course, a dramatic fall doesn't mean airlines are where investors should be putting their capital now. But the underlying reasons behind dramatic moves in industries can clarify trends that may significantly affect investments. Just make sure to do your own due diligence rather than simply following crowds or individual recommendations.