It feels like a scene from a slasher film: Mr. Market grabs a blunt object and clobbers the stock prices of innocent bystanders. Banks with risky loans are suddenly left pleading for one more day. Hedge funds are liquidating their holdings by the dozens, just to stay afloat.

And now a gaggle of crazies -- Freddy, Jason, and Jigsaw -- are standing in the corner whispering, "Let’s play a game."  

On second thought, let's not
For many investors, it’s not a dozen or so stocks that scare them. It’s their whole portfolio, and the recent volatility of the market. Here at the Fool, we’ve been serving up daily market analysis and commentary to help you make rational decisions based on long-term thinking. However, we’d be lying if we said that every hammered stock presented an opportunity.

There are still stocks out there that will leech your portfolio.

And 2007’s Scariest Stock is …
Last year for our World’s Scariest Stocks contest, we looked at 11 companies that were rated poorly among our CAPS community. Needless to say, they’re all in the red significantly. And based on your votes, you singled out DryShips (NASDAQ:DRYS) as the world’s scariest stock for 2007. Its performance has been scary as charged, but it hasn’t been the worst performer so far:

Company

Price on 10/28/08

Price on 10/29/07

Return

Crocs

$1.79

$72.20

-97.5%

Select Comfort (NASDAQ:SCSS)

$0.48

$11.11

-95.7%

XM Satellite Radio (NASDAQ:SIRI)*

$1.66

$15.17

-89.1%

DryShips

$14.05

$128.35

-89.1%

Overstock

$9.73

$38.00

-74.4%

Blue Nile

$24.99

$80.30

-68.9%

Goodyear Tire & Rubber

$8.60

$27.11

-68.3%

Research in Motion (NASDAQ:RIMM)

$46.99

$122.06

-61.5%

Google (NASDAQ:GOOG)

$368.75

$679.23

-45.7%

Dendreon (NASDAQ:DNDN)

$4.45

$7.59

-41.4%

Amazon.com (NASDAQ:AMZN)

$56.04

$90.10

-37.8%

*XM Satellite Radio merged with Sirius to form Sirius XM Radio on July 29, 2008. The price on 10/29/2007 was taken from Capital IQ. The price on 10/28/2008 was derived by multiplying Sirius XM Radio’s adjusted closing price by 4.6, which is the number of shares that XM shareholders received from the Sirius merger.
Source: Yahoo! Finance, using adjusted close prices for the given dates.

Wait, but most companies not on our list are red year over year as well. Before you go calling foul, I should point out that the S&P 500 posted a negative 39% in that same time frame. So, of the companies we highlighted last year, only one -- Amazon.com -- beat the market, but that was by a measly percentage point. Meanwhile, two -- Select Comfort and Crocs -- have lost over 95% of their stock price since.

Now that’s frightful
Onto this year’s list of scariest stocks. Our analysts have singled out eight companies that they believe should scare your booties right off. You’ll see some repeat offenders on our list from last year and some familiar faces -- but all of the companies below have been rated negatively by our community with one or two stars (out of five) in CAPS. If you agree with an analyst, rate that stock an "underperform" in CAPS. If you disagree -- hey that’s okay, too -- just rate the company an "outperform" in CAPS. Based on your votes, we will declare a winner. So help us choose the world’s scariest stock by telling us which stock keeps you up at night.

The World’s Scariest Stocks:

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Fool Katrina Chan does own shares of Starbucks but holds no positions on any of the other companies mentioned. Amazon.com and Starbucks are Stock Advisor recommendations. Google and Blue Nile are Rule Breakers picks. Starbucks and Sears are Inside Value selections. Crocs is a Motley Fool Hidden Gems Pay Dirt pick. The Motley Fool owns shares of Starbucks. The Fool’s disclosure policy dueled Colonel Mustard with a wrench in the conservatory.