The stock market has held up well in 2017, extending the bull market into its ninth year and producing solid performance for long-term investors. Even in the best of markets, some stocks won't participate, and company-specific problems often send shares sharply lower regardless of what's happening with major market benchmarks. Rite Aid (RAD +0.00%), Ensco (ESV +0.00%), and Teva Pharmaceutical Industries (TEVA 2.59%) have all lost 50% or more so far this year, and suffering shareholders want to know whether they're due for a rebound, or will continue to fall.
Rite Aid picks up the pieces
Rite Aid is the hardest-hit stock on this list, falling almost 70% so far in 2017. The drugstore chain had to deal with the huge setback of having its proposed merger with Walgreens Boots Alliance (WBA +0.00%) crumble throughout the year.
Early on, Rite Aid had to accept a lower price in order to buy more time for the deal to get through regulatory scrutiny. Yet even that extra time didn't allay the concerns that regulators had about the potential competitive impact of the deal on the drugstore industry. In the end, Rite Aid had to content itself with a partial asset sale, getting $5.1 billion in exchange for selling 2,100 stores to Walgreens.
Even now, investors aren't certain what the future will bring. Even the asset sale has to get through regulatory scrutiny, and some fear that the competitive impacts that troubled regulators might still exist in this version of the deal.
Bargain-hunting investors have started to look at the potential that Rite Aid has for growth in the future, and although it's a risky move, the extent of the drop makes the potential upside attractive. With extensive debt and uncertain prospects, Rite Aid shares are certainly not for the meek right now.
Image source: Rite Aid.
Ensco makes a deal in tough times
The tough environment in the crude-oil industry has been going on for a couple of years now. Even after a nice rebound in 2016, oil and gas stocks have had to deal with another leg downward in 2017 as the pricing environment has failed to keep improving. The offshore-drilling segment got hit especially hard, and Ensco wasn't able to avoid the swoon in its stock price that it and most of its peers suffered.
Looking ahead, investors are starting to see reasons to be optimistic about Ensco's prospects. The company was aggressive in its move to acquire peer Atwood Oceanics, using its leverage as a healthier player in the space to pick up a struggling rival on the cheap. If rig counts can expand in the months and years to come, then the move could prove extremely lucrative, paying off for Ensco and its shareholders.
There's still plenty of risk, but unless you think oil prices are down to stay, Ensco has more capacity than many to ride out tough times and prepare for an eventual recovery.
Teva tries to ride out the storm
Teva Pharmaceutical Industries has had to deal with a combination of factors that have sent its stock price downward. In its most recent quarterly results, Teva saw its revenue rise 13%, but that was affected considerably by its acquisition of Actavis Generics.
Increased competition and mergers among its customer base have contributed to tougher pricing and sales volume conditions, especially in the U.S. market. Teva's proprietary drug sales have also suffered, with multiple-sclerosis treatment Copaxone taking a double-digit percentage hit. In response, adjusted net income suffered, and Teva felt it necessary to slash its dividend by 75%.
Teva is still working with an interim CEO at a time when it needs strategic direction. Until the drug company gets its act together internally, it will be tough for the stock to mount a lasting rebound.
Value investors often make the mistake of thinking that any stock that drops 50% or more is automatically a good buy. That doesn't appear to be the case with Teva, at least until it can reestablish itself and its business prospects going forward. Rite Aid also faces ongoing challenges, and that could make Ensco the best prospect for a rebound in the months and years to come.
