by Jeff Reeves | March 6, 2014 4:49 pm
On March 9, 2009, the S&P 500 Index bottomed at 676.53.
Since then, the benchmark has soared 170% — and many stocks have done even better than that in the past five years.
However, a raging bull market doesn’t mean every stock wins. There are a host of plays that have lagged the market considerably — and a handful that actually are lower now than they were during the depths of the financial crisis.
Here are 10 S&P 500 stocks that have gone nowhere in the past five years and continue to face serious challenges to their businesses in 2014.
Industry: Oil service and exploration
Market Capitalization: $6.7 billion
Total Return Since 3/9/2009: 20%
Diamond Offshore (DO), an oil service stock that focuses on deepwater drilling, has been nothing but bad news since 2009. Share prices remain slightly in the red compared with the bear market low, but thanks to dividends it has managed to post a total return of 20%.
But note: If you’re measuring from the 2009 highs instead of March 9, share prices are more than 50% lower.
Also note that dividends totaled $8 per share in 2009 before dropping to $5.25 in 2010 and then $3.50 in 2011 – where payouts have stayed.
As oil prices crashed and deepwater drilling became less profitable (and also less popular thanks to the Deepwater Horizon disaster), Diamond Offshore has had a rough go of things … and its 16% declines in the first few months of 2014 show that the pain might not be over yet.
Market Capitalization: $8.8 billion
Total Return since 3/9/2009: 15%
Best Buy (BBY) is another stock that would be nearly in the red if it wasn’t for dividends.
But more importantly, it would be soundly in the black if the embattled retailer hadn’t blown up recently after ugly holiday sales sparked a roughly 40% decline for the stock in late January.
The bad news shouldn’t exactly be a surprise, since Best Buy is the poster child for dying brick-and-mortar retailers. But given the tremendous run for the stock in 2013 — a 245% gain on the calendar year to rank it as the third-best performer in the S&P last year — investors might have thought the worst was over.
Industry: Energy utilities
Market Capitalization: $12.9 billion
Total Return since 3/9/2009: 10%
FirstEnergy (FE) is one of the nation’s largest publicly owned utilities. But scale hasn’t spared FirstEnergy from big declines, and investing in the theoretically stable business of an electric utility hasn’t saved FE stock holders from a lost five years.
First, the company suffered some horrible press in the early 2000s after blackouts darkened New York City and other regions, and as a result FirstEnergy plowed a boatload of cash into upgrades. A costly company reorganization also struck at the same time that commodity prices started putting added pressure on the bottom line.
Debt has gone through the roof, revenue has been pressured and the company actually has been looking at unloading some hydroelectric plants to raise cash and streamline operations further.
More recently, FE stock is down more than 20% in the past year. Its dividend yield after this crash is attractive at 4.7%, but whether FirstEnergy is stable enough to keep its share price steady and maintain that payout still remains an open question.
Market Capitalization: $4.5 billion
Total Return Since 3/9/2009: 7%
While a host of financial stocks have snapped back strongly from the bear market lows as the dust settled (and as bailouts propped them up), that hasn’t been the case for People’s United (PBCT).
The bank has been conspicuously absent from a rally for the broader financial sector in the last few years as the dark days of 2009 have been put farther and farther in the rear-view.
The problem isn’t just the meltdown of the mortgage market — or an ugly incident in 2008 that involved the loss of very sensitive data for millions of its clients.
The big issue for investors is that revenues and total assets have remained pressured, while accounting tricks like buybacks have propped up earnings per share.
While other banks have been able to get ahead thanks to consolidation and cost-cutting, or at the very least rebound thanks to a shift in sentiment, PBCT hasn’t been so lucky.
Industry: Oil service and exploration
Market Capitalization: $15.4 billion
Total Return Since 3/9/2009: -5%
Just as Diamond Offshore has faced pressure thanks to relatively cheaper oil prices and pressures on energy demand caused by the great recession, Transocean (RIG) is in the same boat.
But part of the reason that RIG is in the red since 2009’s lows — even including dividends — is because of its very public role in the Deepwater Horizon disaster of 2011 that spilled nearly 5 million barrels of oil into the Gulf of Mexico in the largest offshore oil spill in U.S. history.
The company has tried to move on, including agreeing to a $1 billion settlement a year ago, but the price it has paid was significant at a time when other issues already had created serious headwinds for the energy industry.
Market Capitalization: $7.4 billion
Total Return Since 3/9/2009: -12%
Poor Staples (SPLS). Office supply stores have been brutalized by the dual pressures of e-commerce and the decline of PC sales — one of the few high-margin devices that Staples has in inventory.
In 2009, Staples recorded total revenues of $24.4 billion. This year, the company is projected to tally $23.2 billion in sales.
No wonder Staples just announced it is closing up to 225 North American stores after another bad earnings report. The only way this stock can manage to get ahead is to slash costs and reduce its real estate footprint as more office sales go online.
Industry: Electric utilities
Market Capitalization: $25.6 billion
Total Return Since 3/9/2009: -13%
Like FirstEnergy, Exelon (EXC) has been pinched by falling energy demand and volatile commodity prices since the Great Recession.
Many investors consider utilities low risk, and while it’s true that they can be more stable it is also clear that picks like Exelon have lacked any pop in a decidedly “risk-on” environment. Even the decent dividends haven’t been enough to push total returns into the black since March 9, 2009.
Speaking of dividends, Exelon actually slashed its payout 41% from 52.5 cents to 31 cents quarterly last year on weak earnings and a sharp rise in operating costs.
Utility stocks clearly have little growth potential, and have little to offer beyond the dividend. And when a stock like EXC cuts that dividend … look out below.
Market Capitalization: $4.8 billion
Total Return Since 3/9/2009: -16%
Coal is one of the dirtiest forms of energy, and despite special interest groups that push for “clean coal” technology as a way to use this abundant commodity, there simply isn’t much Western demand for the stuff.
As a result, coal king Peabody Energy (BTU) has taken it on the chin as revenues have been challenged and the company struggles to remain profitable in this rather hostile environment.
It’s not just President Barack Obama’s stricter regulations and “war on coal.” There’s also increasing pressure to find cleaner alternatives to coal in China thanks to some serious pollution issues there caused by coal power plans, among other things. The strong dollar and generally weak commodity pricing also have held back sales and profits to boot.
There might a future for coal, just like there remains a future for tobacco companies despite their products’ obvious drawbacks. But given recent ills, it’s unlikely the pain will end anytime soon for Peabody as it figures out how to right-size amid the decline of coal.
Industry: Metals & mining
Market Capitalization: $12.4 billion
Total Return Since 3/9/2009: -27%
Newmont Mining (NEM) is a gold and copper company that has been slammed by the weak commodity prices that have been a feature of Wall Street since the bear market lows. While lower input costs might be nice for manufacturers, companies like Newmont that spend big bucks on mining operations have been in deep trouble as the metals they extract command low prices on the open market.
The company also has been the target of a lot of negativity since 2011, as gold prices collapsed from record highs and Wall Street shunned the precious metal.
For fiscal 2014, Newmont looks to be stabilizing after a big loss in fiscal 2013 … but analysts still predict another 5% to 10% decline in revenue despite better profitability.
Industry: Solar energy
Market Capitalization: $5.8 billion
Total Return Since 3/9/2009: -46%
First Solar (FSLR) has returned to the limelight after a great run since early last year. Shares have doubled, demand has increased and investors have been rewarded.
But despite this short-term pop, the long-term performance of FSLR remains the ugliest in the S&P 500.
The factors that gutted First Solar are numerous. First, the stock was a momentum darling in 2008 — and when growth appeared to dry up, so did investor interest. Shares fell from $300 to $100 in mid-2008.
Secondly, FSLR benefited from high energy prices that made solar technology attractive. When oil fell, so did demand for alternative energy sources that were no longer as cost effective.
Lastly, the glut of oversupply was caused not just by a lack of pricing competition vs. fossil fuels but an end to government subsidies in Europe and big uncertainty sparked by the financial crisis that eliminated capital intensive projects like solar installations for businesses and consumers alike.
It was a perfect storm, with most of the thunder and lightning coming in 2011, when FSLR dropped 75%. And while First Solar has fought back recently, it still has a long way to go to reach levels seen before the financial crisis.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP.
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