3 Stocks That Might Disappear in 2014

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2013 was a killer year for the stock market, with the S&P 500 up about 29% on the year.

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And looking ahead to 2014, things could be even better for some high-fliers with big momentum. The U.S. economy is mending, with unemployment down to 7% and the housing market humming along, and regions like China and Europe are looking up, too.

Unfortunately, not every company has shared in this success.

Thanks to specific problems, these three stocks are in deep trouble as we turn the page on a new year. And there’s a good chance that over the next 12 months we could see them break up, restructure, beg for a buyout to avoid evaporating … or if things continue to deteriorate, perhaps even consider closing up shop altogether.

Here are three stocks that might disappear in 2014…

BlackBerry (BBRY)

blackberry-bbry-stock-earningsSure, BlackBerry (BBRY) has a storied history as the creator of the first successful smartphone. And sure, BBRY sported about $3 billion in cash and short-term investments at the end of November.

But the beleaguered tech stock posted a simply staggering $4.4 billion loss in Q3 on a 56% sales decline, hasn’t posted an annual profit in two years and is projected to bleed cash through 2016.

$3 billion is a lot of money… but those are a lot of losses to stomach. And now there’s $1 billion in debt on the books to worry about for a company that historically hasn’t carried any debt.

Besides, the negativity is only accelerating as consumers and businesses abandon BlackBerry devices amid concerns the company won’t be around to service them in a few years. That makes BBRY declines and its strategic challenges almost a self-fulfilling prophecy for failure.

The fact BlackBerry co-founder recently Michael Lazaridis dumped 3.5 million shares is telling, too. It’s never a good sign when a guy who built a company from the ground up loses faith.

BBRY stock has popped almost 15% in recent days on news it will partner with Taiwan’s Foxconn for handset production to limit writedown risk in the future — yes, that Foxconn, the one that works with Apple (AAPL) — but mitigating production risk isn’t the same as ensuring consumer demand worldwide.

In addition to plummeting sales at home, once-powerful global markets are starting to crumble — such as a big rollback in Indonesia where BBRY market share fell from 39% to 21% in Q2 amid the mayhem, according to a report from IDC.

There is room for a No. 3 smartphone player behind Apple and Google (GOOG) with its Android-powered devices. But that’s likely going to be Microsoft (MSFT) with its Windows Phone software and Nokia (NOK) hardware … not BBRY.

RadioShack (RSH)

Radioshack-rsh-stock-earningsRadioShack (RSH) is the wrong company at the wrong time. Brick-and-mortar retail remains challenged in the age of e-commerce, and many specialty electronics that were once hard to find are now available quickly and cheaply with just the click of a mouse.

RadioShack hasn’t turned a profit since fiscal 2011 as a result of these big trends, and while losses are forecast to narrow in 2014, that doesn’t solve the fact that its burning cash with no hope for a turnaround. Consider that Q3 revenue was down about 10% year-over-year … and down about 19% from fiscal 2009 sales!

Meanwhile, RSH stock is sitting on half a billion in debt but its cash on hand is down to about $316 million at the end of September.

When a company is losing cash, suffering falling sales and watching its cash cushion evaporate, it’s a recipe for disaster. With a credit rating of CCC+ from Standard & Poor’s, RadioShack is clearly in junk territory and may not be able to borrow its way out of this cash crunch.

Now, believers will point to the fact that RSH is up 25% year-to-date, and that new CEO Joe Magnacca is on his way to transforming the business. But investors should remember that there isn’t a lot to work with here before they get too excited. RadioShack is valued at less than $300 million, canceled its dividend last year and has pretty much bet the farm on a “Let’s Play!” message for its stores and its brand … and if this doesn’t catch on, it will be lights out for RadioShack in 2014.

JCPenney (JCP)

jcpenney-jcp-stock-earningsEverybody knows the pain of JCPenney (JCP), with its 54% declines in 2013.

The flop of JCP stock in the wake of Ron Johnson’s ill-advised reformulation of the stodgy department store has been a thing to behold … as has the rather awkward about-face that followed, with the installment of Mike Ullman again as CEO despite the fact he presided over some pretty disappointing years of declines at JCP.

But this isn’t just a story of musical chairs in the C-suite. This is a story about numbers that don’t add up.

Consider the nearly $5 billion in long-term debt — twice JCP’s market capitalization and roughly the same amount of total assets the company holds.

Consider JCP is about to close out its third unprofitable year in a row, with not a single quarter projected to be in the black next year.

Consider the debt scare a few months ago that showed serious liquidity concerns.

Forget what you think about the brand or the management. The bottom line is the bottom line. From fiscal 2012 to 2013, sales plummeted 25% … and in the current fiscal year they are forecast to drop another 7% to 10%.

Bleeding cash, huge debt and falling sales … that’s the blueprint for a stock that is in deep trouble in 2014.

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 editor@investorplace.com or follow him on Twitter via @JeffReevesIP


Article printed from InvestorPlace Media, https://investorplace.com/2013/12/3-stocks-might-disappear-2014/.

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