Stock market ups and downs are, for the most part, inevitable when it comes to investing. Over the long term, stock returns follow the operating fundamentals of the underlying firm. That is a good thing when a company grows over time, but can be rather frightening when the fundamentals are heading in the other direction. (To learn more, see Stock Market Risk: Wagging The Tails.)

With that, here is a list of five stocks that have lost a major percentage of their stock market capitalizations so far this year and whose underlying businesses have highly uncertain recovery potential at this point in time. They have haunted investors unfortunate enough to have held the shares during the free falls.

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1. Affymax (Nasdaq:AFFY)
YTD loss: 79%
Affymax is a biotech firm that is in the final testing stages for an anemia drug that would compete with drug giant Johnson & Johnson (NYSE:JNJ), as well as other similar drugs already on the market. The shares took a tumble recently in a patent dispute with J&J where an arbitrator ruled in favor of J&J. They took an even bigger tumble in late June when tests showed that patients taking the trial drug experienced adverse heart-related issues. Add it up and the stock is down nearly 80% for the year. It represents another speculative play, but at this point the stock market is not pricing in much likelihood that the drug sees approval. The company has its hopes on approval in the first half of 2011 and could quickly make a comeback from the dead. (For more, check out Chasing Down Biotech Zombie Stocks.)

2. Corinthian Colleges (Nasdaq:COCO)
YTD loss: 64%
The ticker of this stock also is also the nickname for comedian and talk show host Conan O'Brien, but nothing's been humorous at all for COCO's shareholders. This for-profit educator has been caught up in overall industry turmoil over concerns that graduation rates are too low and that students are taking on high levels of student debt and have a low likelihood of ever being able to repay it. In addition, Corinthian has been hit by a down economy and merger-integration issues from the acquisition of a number of smaller rivals.

Risks are that the company could lose the ability to offer government financial aid at some of its schools. It is also a smaller player in the industry and as a result has been whipsawed more than rivals during the current turmoil. Investors are unlikely to see a treat in this investment any time soon.

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3. FormFactor (Nasdaq:FORM)
YTD loss: 60%
FormFactor operates in the hyper-competitive semiconductor market and sells products that help manufacturers test and sort chips while they are being made. It also operates in the highly cyclical DRAM memory market that accounted for approximately 80% of sales. This volatile market has been especially erratic and FormFactor has seen sales and profits suffer for more than two years now. A new management team implemented in the middle of this year has so far been unable to stem the slide in operating fundamentals. The stock has only followed suit, though now it has fallen so low there is speculation that a rival could pick up the firm on the cheap given FormFactor is still respected for its technological savvy.

4. Bank of Ireland (NYSE:IRE)
YTD loss: 57%
Worries continue to abound that Bank of Ireland will follow its archrival Anglo Irish Banks and be nationalized by the Irish government. A historical housing bubble has rocked the entire country and Bank of Ireland was caught up in the middle of the storm given that many of its residential and commercial loans have gone sour. It has remained highly dependent on government aid since the height of the mortgage crisis in 2008 and conditions have not improved much this year, though Anglo Irish was nationalized and it is believed Bank of Ireland will not need further capital infusions. However, uncertainty remains high in Ireland and this does not bode well for Bank of Ireland's future. (To learn more, see The Industry Handbook: The Banking Industry.)

5. Vermillion Inc (Nasdaq:VRML)
YTD loss: 56%
Vermillion has been among the scariest investments out there given it has the dubious distinction as one of the worst-performing stocks this year. Vermillion is a biotech firm that recently launched a test that is used by physicians to detect if ovarian tumors are malignant or benign. Due to the high level of development costs, the firm has already taken a trip down bankruptcy lane in early 2009 (a strategic filing of Chapter 11) and came out of bankruptcy in July 2010, just after the FDA approved its OVA1 test. Its shares were relisted on the Nasdaq exchange on July 6 of this year after trading over the counter. The stock has lost more than half its value since the end of its first day after relisting.

The Bottom Line
A company that has seen its stock price severely punished due to adverse operating developments is best avoided by most investors. For others, negativity can spell opportunity if business conditions stabilize or eventually hit bottom and start to recover. The group mentioned above has haunted existing investors but could end up treating those brave enough to enter the extremely speculative waters. (For more, check out Seven Forehead-Slapping Stock Blunders.)

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