The art of losing isn't hard to master;
so many things seem filled with the intent
to be lost that their loss is no disaster.
-- From "One Art," by Elizabeth Bishop
These three companies just didn't live up to Mr. Market's expectations last week. Sometimes an earnings stumble is a signal to sell, but digging in the dirt is also a good way to find turnaround candidates while they're getting beaten down. Let's strain the silt to separate the artful dodgers from the real disasters.
Then practice losing farther, losing faster
While Lipitor is the biggest traditional moneymaker in Pfizer's portfolio, it was by no means the only product that saw sales falling off a precipice: Hypertension drug Norvasc and allergy ameliorator Zyrtec already lost their patent protections and nearly $1 billion of their quarterly sales.
Management is sticking to their earlier forecast for 2008 because "the first-quarter 2008 is not comparable to the year-ago quarter due to the loss of U.S. exclusivity of Norvasc in late March 2007 and Zyrtec in late January 2008," and the company is in full-fledged cost-cutting mode right now.
Though the stock certainly looks cheap today at just 2.1 times book value -- well below historical norms -- I can't say I'm tempted to buy any. Where's the next miracle drug?
And look! my last, or next-to-last, of three loved houses went
Everyone expected Washington Mutual
Management pointed to the deadly downturn in mortgage markets as the main reason behind this shortfall. "We saw a housing slowdown coming," said CEO Kerry Killinger in the usual conference call with analysts. "The board and management took major actions to prepare for the slowdown, but it wasn't enough. [...] In short, the actual magnitude of the housing downturn -- and the unprecedented disruptions in the capital markets -- has overcome much of our preparations."
WaMu is far from alone in this predicament, as financial institutions from Bank of America
The American economy will eventually hit rock bottom and start to bounce back up again, and the banks will perform that 180-degree turn with more flair and elan than most sectors. Until that time, I'm keeping my portfolio far away from what has become a band of value destroyers. You can come back when the times, they have a-changed, OK?
Accept the fluster of lost door keys, the hour badly spent
Let's end on a positive note this time. Online stock brokerage and consumer banking service E*Trade Financial
E*Trade still trades in penny-stock territory, but seems on track to turn things around if given some time. Management is selling "non-core assets," and the trading platform has reignited its stalled growth again. Cutting the company down to bare-bones basics and making money where there's some to be made sounds to me like an eminently reasonable strategy.
I miss them, but it wasn't a disaster
Some of these underperformers are victims of larger circumstances, while others might have only themselves to blame. It's up to you to decide which down-on-their-luck companies should be able to pull themselves up by the bootstraps, and which ones are stuck in the mud for real.
Further Foolish reading:
Fool contributor Anders Bylund holds no position in the companies discussed this week, though E*Trade is his trading house of choice. Washington Mutual is a former Income Investor recommendation. The Fool has an ironclad disclosure policy, and you can see Anders' current holdings for yourself.