Deathbed Stocks Revisited

Over the past year, we've been chronicling companies that appear to be on their deathbeds. As we noted, not every company will give up the ghost, but since that original column, quite a few have either disappeared entirely or seen huge drops in their share prices: Fannie Mae, Merrill Lynch, Lehman Brothers, Bear Stearns, Washington Mutual, and XM Satellite Radio to name just a few.

What we do is check for stocks that have been given the lowest rating -- one star -- from the savvy investors in our 125,000-member Motley Fool CAPS community and then pair that information with various financial ratios that flash like a neon sign that the end is near.

Now that a third of those original companies have gone under or otherwise disappeared, let's take a look at some of those stocks that were deemed to be on their deathbeds.

Source: Yahoo! Finance.
* As of 7/29/08, merged with Sirius Satellite Radio.

Over the months since these companies first appeared, Charter Communications announced plans to declare bankruptcy, and Pacific Ethanol defaulted on its debt covenants, though it has received temporary forbearance by the lenders. And General Motors is holding on by the slimmest of threads to solvency, while Nextwave Wireless seems poised on the precipice as well. It wants to divest most of its IP wireless business, and one of its wholly owned subsidiaries has already declared bankruptcy.

Whistling past the graveyard
It wasn't the worst performer, but Isle of Capri Casinos still looks gravely ill, even if it has received a large response to its tender offer to retire $140 million in senior subordinated notes. The gaming industry in general is down on its chips, with even the biggest names in the industry, like Las Vegas Sands, suffering from the economic downturn.

But Isle of Capri still has a lot of poisonous debt and little cash, forcing it to delay its Biloxi casino expansion and shut its Florida Pompano Park horse racing track down for the summer, ending a decade of year-round harness racing. Maybe because it’s a regional gaming house that's not on the Vegas strip, some feel it's insulated from the worst of it. But CAPS member TSIF thinks investors need to know when to give up on this stock:

You gotta know when to hold 'em, know when to fold 'em, know when to walk away, know when to RUN!!!! (Just be glad you can't hear me singing from where you are!!). Despite the three Goldstein Brothers buying up a quarter million shares of Isle, things aren't looking too good on that Isle of Capri....Capri has 18 casino's and a race track in Florida, I don't here much 'kaching" going on right now in those high traffic tourist areas. Maybe I'm too soon, New Orleans might be booming in Feb for Mardi Gras or the Goldsteins may have another ACE up their sleeves, but I'm betting they can't prop this beast up for the next year plus of economic gloom we will be having.

Rattling the cage
We'll be back next week to identify more stocks that are leaving investors feeling ill. In the meantime, it pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made -- all from your favorite stock's CAPS page. Sign up today, absolutely free, and let us know whether you think a stock is headed for its demise.