I usually think of a surprise as something to look forward to, but the market doesn't always care what I think. Sometimes, Mr. Market delivers surprises that just plain bite. At the new Motley Fool CAPS investment research service, we've looked at some highly rated stocks that have done just plain lousy in the previous 30 days. Is this drop a sign that these stocks were overrated, or is it just a good time to take advantage of a blue-light special on a great stock?
Here are the stinky seven for the week, as identified by your fellow Fools on CAPS. Each of the companies below had been given a five-star rating (the highest) by our community of investors just 30 days ago:
|
Stock |
30-day return |
One-year return |
|---|---|---|
|
Jupitermedia |
-33.9% |
-59.8% |
|
LifeCell |
-26.8% |
17.1% |
|
Merge Technologies |
-25.1% |
-78% |
|
LoJack |
-24.4% |
-40.9% |
|
Zones |
-23% |
62.2% |
|
Sun Healthcare Group |
-22.9% |
40.1% |
|
Christopher & Banks |
-21.7% |
43.7% |
The CAPS community came down hard on six out of these seven stocks, demoting them from their former five-star status. Merge Technologies and Zones in particular have been harshly judged, plunging from five stars down to three and two, respectively. Both companies recently disappointed investors with less-than-stellar earnings. Only Christopher & Banks has held the favor of the community, maintaining a five-star rating through its recent tough times. Indeed, this stock still holds an unblemished record among All-Stars, with no underperform ratings from CAPS' elite crew.
Christopher & Banks, which makes its way selling specialty women's apparel, had been on a nice run earlier in the year. It hit the skids when the company recently announced lower-than-expected same-store sales, and simultaneously cut its earnings guidance for the quarter and the full year. Coming off a few tough years as it entered 2006, the company seemed poised to turn things around this year.
Though the comps decline in October came as a big surprise, comps for the year are still up 6%, versus a 2% decline for all of 2005. Year-to-date margins and return on equity also seem to be improving year over year. Though the stock is covered by ten Wall Street analysts, it doesn't seem to get much love from the media, and it could be flying a bit under the radar.
Should you rush out and "buy buy buy" on this alone? Heck no, but Christopher & Banks, if not some of these other former five-stars, might be excellent candidates for further due diligence. In the meantime, get in the game and make yourself heard. Join the more than 13,800 other investors who have already become a part of the greatest investor community out there -- Motley Fool CAPS.
For more five-star failures:
- 5-Star disappointments
- And a few more stinkers
Fool contributor Matt Koppenheffer didn't see these particular moves coming, but he is rarely surprised at Mr. Market's general tomfoolery. He does not own shares of any of the companies mentioned. The Fool's disclosure policy is never disappointing.
