Investors interested in these three companies should approach them with extreme caution. Photo: Eugene Zemlyanskiy, via Flickr.
With the S&P 500 having dipping into "correction" territory, there are bound to be deals available for the astute investor. However, for every "steal" there are just as many value traps that could drop even lower.
The three stocks I'm covering below -- which many Foolish investors are likely familiar with -- are all more than 90% off their highs from the past ten years. However, I think there's still a long way for all three to fall, so I'd avoid them at all costs.
Sears Holdings (SHLD +0.00%)
You probably know the chorus by now: Brick and mortar stores are dying. That's not 100% true, as some have proven their mettle and rebounded since the Great Recession. Others, however, have been in a death spiral for a while now, and folks are just waiting for the other shoe to fall.
Such, I believe, is the case with Sears. While the company's earnings are currently being buoyed by CEO Eddie Lampert's decision to sell off the company's real estate holdings, that tactic can only work for so long. Take a look at how the company's domestic same-store-sales have fared over the past two years.
Make no mistake about it, this is about as ugly as it can get. While it looked in early 2014 like Sears might actually be turning a corner, the wheels absolutely came off over the past year. While some of the sales slump has to do with a reorganization of what the company actually sells, I have a tough time believing that Lampert -- who has an approval rating of just 21% according to Glassdoor.com -- can turn this into a longtime winner.
Over the last twelve months, the company has lost $1.7 million in free cash flow -- it's only a matter of time before this ends in bankruptcy.
3D Systems (DDD 5.39%)
I used to be a tepid owner of 3D Systems' stock. I say "tepid" because I didn't like the company's strategy of pursuing growth almost exclusively via acquisition. While it seemed like a noble goal to become the "one stop shop" for all things 3-D printing, such a task completely ignores the cultural and logistical clashes that can arise when you acquire over 50 companies in just three years' time.
Despite 3D Systems' prodigious reach within the industry, it's difficult to discern if there's any sustainable competitive advantage it has over peers. And even if it did have such an advantage, the commercial and industrial sectors have such a glut of supplies right now that I'm not sure it would matter any time soon.
At the end of 3D Systems' heyday (the end of 2013), the company was able to increase organic sales by 30%. Over the first three quarters of 2015, however, organic growth has been awful, shrinking 7%, 5%, and an astounding 22% -- respectively.
Apollo Education Group (APOL +0.00%)
Photo: Apollo Group
Here's a company that used to be the diamond of its industry: for-profit education. At its height during and just after the great recession, Apollo's flagship University of Phoenix had a mind-boggling half-million students.
But there were lots of cracks in the company's business model: an enormous percentage of money came from the federal government, students were defaulting on their loans at alarming rates, recruiters were using tactics that bordered on predatory in nature, and general outcomes for students weren't positive.
That all came to a head in 2010 when an undercover investigation by the Government Accountability Office (GAO) found several illegal tactics by some of the industry's biggest players, including Apollo. Here's how the company's enrollment has fared since then.
With traditional colleges and universities starting to offer flexible, online courses that are higher quality and cheaper -- and the fact that the Department of Defense now has the school in its crosshairs -- I don't see why the bleed will end anytime soon.
