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2-Star Stocks Poised to Plunge: Sun Microsystems

By Brian D. Pacampara, CFA - Updated Apr 5, 2017 at 7:57PM

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Market-lagging returns could be written in this 2-star.

Based on the aggregated intelligence of 120,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, network computer infrastructure provider Sun Microsystems (NASDAQ:JAVA) has received a distressing two-star ranking. While one-star stocks have been the worst performers, our data has shown that two-star stocks still lag the market by a significant margin and should be approached with caution; conversely, highly-rated stocks have outperformed the S&P.

With that in mind, let's take a closer look at Sun's business and see what CAPS investors are saying about the stock right now.

Sun facts

Headquarters (Founded)

Santa Clara, California (1982)

Market Cap

$3.13 billion


Diversified Computer Systems

TTM Revenue

$13.65 billion


Co-Founder/Chairman Scott McNealy

CEO Jonathan Schwartz

Return on Equity (past five years average and TTM)

(7%) and (27.4%)



Hewlett-Packard (NYSE:HPQ)

CAPS members bearish on JAVA also bearish on

Microsoft (NASDAQ:MSFT),


CAPS members bullish on JAVA also bullish on

Cisco Systems (NASDAQ:CSCO),


Sources: Capital IQ, a division of Standard & Poor's, and Motley Fool CAPS. TTM = trailing 12 months.

Over on CAPS, fully 260 of the 1,647 members who have rated Sun -- some 16% -- believe the stock will underperform the S&P 500 going forward. These bears include dirkness and CAPS All-Star lanceur.

Last week, dirkness wrote that unless Sun "can reinvent themselves once more, they will continue to loose money as server virtualization improves efficiency and slows demand for Sun's hardware."

In a pitch from later that same day, lanceur shares that bearish sentiment, citing several of the clouds starting to cover Sun:

Sun has good products (Java, Solaris, hardware, we'll see about JavaFX), but they're not really in a position to really benefit from them in part because none of them really dominate the competition. Their move to open source the Java and Solaris shows that they're getting a bit desperate.

I think that the coming slump is likely going to hit them harder than most.

What do you think about Sun, or any other stock for that matter? Make your voice heard on Motley Fool CAPS today. More than 120,000 investors are waiting to hear what you have to say. CAPS is 100% free, so simply click here to get started.

On Jan. 12, 2009, Fool co-founder David Gardner, Jeff Fischer, and their Motley Fool Pro team will accept new subscribers to their real-money portfolio service. Motley Fool Pro is investing $1 million of the Fool’s own money in long and short positions in a range of securities, including common stocks, put and call options, and exchange-traded funds (ETFs). They also incorporate proprietary CAPS "community intelligence" data into their research. To learn more about Motley Fool Pro and to receive a private invitation to join, simply enter your email address in the box below.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Microsoft and Intel are Motley Fool Inside Value picks. The Fool owns shares of Intel. The Fool's disclosure policy always gets a perfect score.

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Stocks Mentioned

HP Inc. Stock Quote
HP Inc.
$34.65 (1.26%) $0.43
Microsoft Corporation Stock Quote
Microsoft Corporation
$291.91 (1.70%) $4.89
International Business Machines Corporation Stock Quote
International Business Machines Corporation
$134.01 (1.11%) $1.47
Intel Corporation Stock Quote
Intel Corporation
$36.11 (1.46%) $0.52
Cisco Systems, Inc. Stock Quote
Cisco Systems, Inc.
$46.61 (1.55%) $0.71

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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