5 Deathbed Stocks

We've all heard of the "death rattle," the last gasp from a lost soul's lungs. Sometimes, we seem to hear it from the companies in which we invest. Revenues dry up. Margins contract. Profits evaporate. All these signs suggest that their condition is worsening -- a financial death rattle, if you will.

Stocks in sickbay
Don't assume that all such companies are goners. Some will barely cling to life, while others make a full recovery. Kmart climbed from the coffin of bankruptcy to become part of Sears Holdings, while United Airlines parent UAL recrossed the River Styx to fly the friendly skies once more. But in this column, we're seeking companies that have all but given up the ghost.

For help, we'll turn to the clever coroners at our 83,000-strong Motley Fool CAPS community, where players give the thumbs-up or thumbs-down to more than 5,400 stocks. A year's worth of data suggests that CAPS' highest-rated stocks performed best, while its lowest-rated companies fared worst. We've unearthed a handful of stocks headed six feet under, having recently dropped from two stars to the lowest one-star rating. Are they only mostly dead, or have they truly given up the ghost?

You might be tempted to think that the companies above need the ICU unit at most, rather than a cemetery plot. Deepwater shipwreck-recovery company Odyssey Marine, for example, is actually showing decent, positive returns. Still, it's trading at nearly half the level it reached last May, after its divers discovered 500,000 silver coins in a colonial-era shipwreck -- perhaps the richest-ever treasure find. Stocks that CAPS investors have marked down to one star may be destined to seriously underperform the market in the future, and if the Spanish government's claims that it owns Odyssey's wreck are substantiated, they could prove troublesome.

A horse of a different color
Of all the forms of gambling, betting on the ponies is my favorite. I love the sights, sounds, and smells -- OK, some of the smells -- of the track. And like just about every other railbird there, I've got a system! Yet as much as I love the track, and despite living just 10 minutes from the famed Meadowlands Racetrack, it's been about two years since I've gone.

Unfortunately, horse racing seems to be a dying sport. I can't imagine it ever going away completely, but track operators like MTR Gaming are finding it ever harder to bring bettors in. They've found they need to add other attractions -- simulcasting, slot machines, and casinos -- just to raise some interest and draw visitors.

According to the National Thoroughbred Racing Association, the number of races run declined for at least three years in a row, though purses increased once again last year. Harness racing, where MTR rides, has also been on the decline. Even in Canada, pari-mutuel wagering is reportedly in free fall. Before it consolidated its racing and gaming segments, fellow track operator Penn National Gaming (Nasdaq: PENN) reported steadily declining revenue from its racetracks.

Adding to MTR's woes, it was unable to convert the storied gambling hall Binion's in Las Vegas into a profitable venue; Binion's sale was approved just last week.

Undoubtedly a fellow horse-race lover, CAPS investor racetracker still sees hope in MTR's future, thanks to its willingness to expand the gambling offerings available at its various locations:

MTR Gaming shouold [continue] to grow as the Pennsylvania operations of the slots and racetrack earnings come into play. While they need to continue to try and stabelize the operations at Mountaineer I am bulish that they will get table games and this should help improve the revenues and bottom lime of their West VA. operations. Other than that they need to keep working at improving the casino in Nevada and try to get additonal gaming at their other tracks.

While the CAPS investors who've rated the stock are fairly evenly split over MTR Gaming's ability to beat the market in the future -- 57% say it will -- the bears have yet to pen a pitch on why they think this horse is destined for to the glue factory.

Rattling the cage
Are these companies doomed to drag their investors into an underworld of underperformance? Or will they recover to shine again? On Motley Fool CAPS, you have the power to tell your fellow investors just how you feel. Sign up today, absolutely free, and let us know whether you think the Grim Reaper's at the door.

Fool contributor Rich Duprey does not have a horse in the race with any of the stocks mentioned in this article. You can see his holdings here. Sears Holdings is an Inside Value pick. The Motley Fool has a disclosure policy.