This has been a bad month for Dan Hesse. The sharp plunge in
), which wiped out more than $10 billion in market value over the
past month, cost him his job as the company's CEO. And this
embattled former executive isn't alone.
Dozens of other companies saw their shares plummet over the
past month in the face of dismal quarterly results and other
setbacks. You can expect to find more executive departures in
many of the upcoming board meetings -- especially at firms where
problems surfaced during Q2 and will likely heed the call for a
major business overhaul.
Yet, the outlook for some of the companies with falling stock
prices doesn't look so bleak. A select few possess the
ingredients for a solid snapback in coming months, easing the
pressure on the embattled management teams. Here's a look at
three stocks that plunged at least 25% over the past month, but
now appear poised to make up for lost ground before the year is
This biotech stock had been building an impressive stock chart.
It has set higher highs and higher lows for nearly a year as
investors anticipated fast-track approval for the company'snew
product, Arikayce. Yet in early August, the FDA told Insmed that
it would need to provide
more extensive testing data
before receiving approval.
The news sent shares plunging right back to levels seen when I
profiled the company roughly a year ago on our sister site,
. As I wrote then, "Insmed has developed Arikayce, which is an
inhalable antibiotic that brings medicine right to areas where
lungs are infected."
The good news: there is no reason to believe that Arikayce won't
eventually be approved in the United States. The better news:
European approval for Arikayce may come before the year ends.
Still, the setback is a clear negative, recently forcing the
company to raise more money to complete further testing. With
those negative catalysts now behind Insmed, shares are likely to
move back into the mid-to-upper teens as the eventual U.S.
approval of Arikayce comes back into focus.
The key catalyst behind growth stocks is, well, growth. And
this maker of ultracapacitors was pounding out impressive growth
from 2006 through 2011, as I noted in my
profile of the company
in 2012. Though growth stalled in 2013, analysts expected it to
resume in 2014 and beyond.
That revenue ramp will have to wait. Maxwell recently told
investors that key customers were slow to place orders and that
sales are expected to fall by 10% this year. Analysts expect a
double-digit rebound in sales growth next year, but this is
obviously now a "show-me" stock.
The reason to keep tracking this stock -- which plunged 33% in
the past month -- is that ultracapacitors may play a significant
role in the next generation of electric cars and buses. And
Maxwell, after investing huge sums in R&D in recent years, is
the best-positioned supplier for that trend.
Serving as a regional air carrier is a tough business these days.
Traffic is mostly derived from a
hand-off system from the major airline carriers, and thanks to
cost pressures and pilot shortages, industry profits have been
elusive. SkyWest is faring better than most, generating operating
margins in the 5% range in recent years. Yet, when management
recently warned that the regional carrier would likely lose money
in the second half of 2014, investors fled. This pushed shares
down 25% over the past month despite expectations of a rebound
into the black next year.
From this came an unusual outcome: shares now trade for around
one-third of its tangible book value. In fact, the company's cash
balance is equivalent to its market value, which means that the
fleet of airplanes that it owns, which are carried on the balance
sheet for more than $2 billion, are assigned zero value.
As long as bankruptcy isn't a concern, which it is not in this
instance, then SkyWest merely needs to restructure its operation
to shed money-losing routes and focus on money-making routes. And
that is exactly what management is doing. It's unclear when this
stock will rebound. Investors likely need more details around the
carrier's retrenchment and path back to profitability. But no
matter the timetable for a turnaround, this asset play is now too
compelling to ignore.
Risks to Consider:
These stocks lack imminent catalysts and could still drift
even lower if the market heads south and investors avoid any
firms with warts on them.
Action to Take -->
As Warren Buffett and others consistently note, you can make
great profits on stocks when they are hated, and these three
firms surely are. But they are each facing a better year in 2015,
which should set the stage for a second half rebound in 2014.
Wouldn't it be nice if investing were as easy as buying a
stock, forgetting about it and reaping all the benefits?
My colleague Dave Forest was so intrigued by the idea that he
found a group of companies that fit those criteria. These are
world-dominating firms that pay investors a fat dividend, dig a
deep moat around their business to fend off competitors and buy
back massive amounts of stock, boosting the value of remaining
shares. They're rock solid companies that you can buy, forget
about and hold "Forever." To learn more about Forever stocks,