The wheel of fortune
There's a funny thing about the stock market. The biggest winners often turn into the biggest losers -- or "loosers," for those of you who prefer the parlance of our times. Today's task is to consider just how quickly it can happen.

Although the new year is just more than two months old, we've seen a slew of well-known companies shave large percentages off their market caps. Taking only large ($1 billion-plus) companies trading on major American exchanges, the biggest losers as of the beginning of March were:

"Looser's" roll call


% Drop

P/E Jan

P/E Now





Affymetrix (NASDAQ:AFFX)








Pilgrim's Pride (NYSE:PPC)




Under Armour (NASDAQ:UARM)








American Pharm. (NASDAQ:APPX)








Intuitive Surg. (NASDAQ:ISRG)








*Screening and data from Capital IQ.

I've included the P/E ratio for these firms not so much because I view it as an end-all valuation metric (I don't), but because it provides a very quick clue to the reasons that most of these firms fell. They didn't drop because their earnings did (or their P/E ratios would likely have stayed in line). Nope, in most cases, they dropped simply because investors have just plain decided to pay less for the earnings and, more importantly, the forseeable growth.

What would make the Street decide that a company was suddenly worth 20% to 30% less than it was just two months back? Is the Street right? Answer these questions, and you might just find yourself in a position to buy.

The nitty gritty
Some of the drops here are easier to explain than others. Sirius has come down off its Howard Stern high and has continued to post results that are even worse than the Street expected. "Profitability" of some kind, usually rumored by the faithful to be just a couple quarters or years away, remains just beyond the horizon, like a lush, shimmering oasis in the deepest dunes of the Sahara.

Amazon's earnings dropped in Q4, and investors got spooked by yet another round of those mysterious tech investments -- the kind of thing that makes people wonder whether the retailer will ever achieve the benefits of scale. The $500 million in free cash flow might look tasty to some, but when you consider that the firm is valued at 30 times that FCF even today and that more than half of the FCF came from adjustments to accounts payable, it's really not so hot.

Chicken hawker Pilgrim's Pride is stuck between lower bird prices and higher costs, so the stock price is adjusting to lower expectations for earnings along the way.

Under Armour is simply adjusting to reality. After the stock went nuts post-IPO, people seem to finally be realizing that the pre-IPO, triple-digit growth rates aren't going to continue. Q4 results showed a company growing at a respectable clip, and predictions are for 20% more next year. But as you can see, when you're carrying a triple-digit P/E and you're really just a clothing outfit, eventually, you'll succumb to gravity.

For my money, the falling knives I've considered grabbing are JetBlue and Intuitive Surgical. JetBlue's got a distinctive service, but fuel costs are wringing the earnings out of the company. If it can capitalize on its brand and loyalty to pass on fare increases, things will get better. But as for me, I'll invest once I have a better idea as to whether or not the company can do it.

I've been watching Intuitive Surgical since it was about $30 a share, and although upcoming growth is not going to be nearly as spicy as the Street had hoped, I still believe this stock is a world-beater over the long run. The only question I have is how long the dust needs to settle here as the momo crowd comes to terms with a 2006 that's going to come replete with taxes, stock options expensing, and possibly even some fairly hefty share dilution.

Foolish bottom line
The way I see it, it pays to take a look at the market's losers; doing so provides you with both cautionary tales and investment ideas. In looking over the companies in the above table, it's impossible not to notice that high valuation multiples don't hold forever. Keep that in mind the next time someone tells you that a quality company is worth buying at any price.

On the other hand, there's no doubt that many of the firms up there are high quality -- even market leaders. As the market begins to turn on them (it is by nature a fickle beast), the swings in sentiment can provide entry points to get in on greatness. In fact, the world-beater attributes of JetBlue and Amazon are primary reasons Fool co-founder David Gardner recommended them to his Motley Fool Stock Advisor readers. These two may be having their blips, but overall, David's half of the Stock Advisor scorecard is beating the market by a full 29 percentage points since 2002. A 30-day guest pass will let you see why, as well as learn why Tom Gardner's picks have a 52 percentage point lead on the market.

Seth Jayson is always hoping to learn something about the market. At the time of publication, he had no positions in any firm mentioned here. View his stock holdings and Fool profile here . Affymetrix and Intuitive Surgical are Motley Fool Rule Breakers recommendations. Fool rules arehere.