Pushing Money Off A Cliff Throwing Money Away

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It is rare for a company to lose half of its value during a 90 day period, but it can happen. The markets are always pricing in new information, so when a company's future appears to be seriously threatened, shareholders can get badly burned.

Here's a look at three companies that been mauled over the past quarter.

SunPower: Down 45%

This solar company's shares started to slide after it produced a disappointing second-quarter report. While the headlines numbers themselves were roughly in line with expectations, investors were spooked by SunPower's (NASDAQ:SPWR) guidance.

Management had previously projected that the company would profitable for the full year, but they are now forecasting a net loss of between $125 million and $175 million. If that wasn't bad enough, management also expects to lose at least $100 million in 2017. 

SunPower attributed its downbeat guidance in part to the extension of the solar investment tax credit. Utilities are no longer under a time crunch to finish projects by year end, which has resulted in softening demand.

There's hope that by growing its position in the consumer market, the company can offset its low order rate for commercial projects, but its falling share price hints that Wall Street doesn't see that happening.

Corrections Corporation of America: Down 53%

The markets have placed shares of Corrections Corporation of America (NYSE:CXW) under arrest this quarter, and the evidence against its investment thesis is fairly ironclad. 

The Department of Justice released a report in August that concluded privately operated prisons are less safe for both inmates and employees when compared government-run facilities. That report contributed to the DOJ's decision to phase out its use of private prisons in the future. 

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All of this has clearly frightened CCA's shareholders, and rightly so. As America's largest corporate owner and operator of prisons, it has a lot to lose if state and local governments follow the federal government's lead. If a significant number do, CCA's long-term growth prospects could evaporate, which is even more troubling considering that it already sports a dividend payout ratio of 125%. 

Novavax: Down 69%

Rounding out today's list is Novavax (NASDAQ:NVAX), a clinical-stage biotech primarily focused on vaccine research.

The company's shares were slaughtered in the middle of September after it reported disappointing late-stage clinical data for its experimental respiratory syncytial virus (RSV) vaccine. Specifically, Novavax said that the drug failed to meet both its primary and secondary endpoints in a trial designed to vaccinate adults ages 60 and older. Analysts had projected billions in annual sales for the vaccine if it reached the market, so it's no surprise that traders slammed the company's shares given its disappointing clinical results.

Novavax is still running another Phase 3 trial aimed at passing immunity on to infants by giving the vaccine to pregnant women, so there is still a bit of hope for it. However, given its complete whiff when targeting older adults, it is hard to like the company's chances. 

Are any worth buying?

Picking up high-quality stocks that are temporarily out of favor can be a sound long-term investing strategy. However, that only works if you find high-quality companies, and I'm not convinced that any of these three companies fit that description. For that reason, I'd suggest looking elsewhere for value.

Brian Feroldi has no position in any stocks mentioned. Like this article? Follow him on Twitter where he goes by the handle @Longtermmindset or connect with him on LinkedIn to see more articles like this.

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