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Today’s 3 Worst Stocks in the S&P 500

By John Divine – Feb 20, 2014 at 7:09PM

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Cliffs Natural Resources, Cabot Oil & Gas, and the ADT Corporation plagued the benchmark index today

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

The stock market bounced back from a lackluster performance yesterday, seizing on strong U.S. manufacturing numbers to justify its gains. Only last month, Wall Street found itself stricken with anxiety from China's surprisingly weak manufacturing output -- how quickly things can change in a matter of weeks! The S&P 500 Index (^GSPC -0.73%) added 11 points, or 0.6%, to end at 1,839. All it needs is another 0.6% gain to reach all-time highs.

Cliffs Natural Resources (CLF -4.08%), on the other hand, isn't in much danger of eclipsing record levels. Shares shed 2.4%, the most in the entire S&P 500, as Morgan Stanley added insult to injury by not only reiterating an underweight rating on the stock, but lowering its price target from $12 to $10 a share. For perspective, Cliffs Natural Resources would have to fall more than 50% to reach those levels. Even though the coal and iron ore miner swung to a profit in its most recent quarter, pessimism is easy to come by, and the company is currently fighting back against an activist investor intent upon changing the structure of the entire company. 

Even though the materials sector gained more than any other in the stock market today, Cabot Oil & Gas (CTRA -1.88%) managed to join Cliffs at the bottom of the S&P Thursday, losing 2%. It's hard to understand the psychology behind a move like this, which came before Cabot's scheduled quarterly earnings release after hours today. Betting on whether earnings will overachieve or underachieve in any given quarter is like betting on black or red in roulette: unadvisable. Your best bet is to keep your money in your pocket -- Cabot Oil & Gas added more than 2% in after hours trading on Thursday after exceeding earnings and revenue expectations. 

The ADT Corporation (NYSE: ADT) continued its recent downtrend on Thursday, losing 1.9% in trading. Shares of the security company are off about 22% in the last month alone, losses mainly driven by ADT's weak quarterly report at the end of January. The business was only able to increase revenues by 3.7%, and earnings actually fell from the same quarter a year prior. The good news is that ADT pays a decent, sustainable 2.6% annual dividend, something you might expect from a profitable, low-growth company. However, ADT's balance sheets could use some work, as its debt-to-equity ratio sits around 1.4, and its current liabilities exceed its current assets.

John Divine has no position in any stocks mentioned. You can follow him on Twitter @divinebizkid and on Motley Fool CAPS @TMFDivine.

The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Stocks Mentioned

S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$3,934.38 (-0.73%) $-29.13
Cleveland-Cliffs Stock Quote
Cleveland-Cliffs
CLF
$15.50 (-4.08%) $0.66
Coterra Energy Stock Quote
Coterra Energy
CTRA
$24.48 (-1.88%) $0.47

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

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