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.

IN PICTURES: Learn To Invest In 10 Steps

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.

IN PICTURES: 10 Biggest Losers In Finance

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.)

For the latest financial news, see Water Cooler Finance: Ghosts Of Economies Past.

Related Articles
  1. Professionals

    How to Protect Your Portfolio from a Market Crash

    Although market crashes are usually bad news for your portfolio, there are several ways to minimize losses or even profit outright from market movement.
  2. Investing Basics

    3 Key Signs Of A Market Top

    When stocks rise or fall, the financial fate of investors change, as well. There are certain signs that can reveal a stock’s course, and investors don’t need to be experts to spot them.
  3. Investing

    Asset Manager Ethics: Rules Governing Capital Markets

    The integrity of the capital markets needs to be kept at utmost importance for all investors. This article shows how to maintain the integrity while investing.
  4. Mutual Funds & ETFs

    Using Short ETFs to Battle a Down Market

    Instead of selling your stocks to get gains, consider a short selling strategy, specifically one that uses short ETFs that help manage the risk.
  5. Markets

    Is Another Bear Market Ahead?

    With market volatility recently reaching its highest level, investors are questioning what the outlook is for U.S. stocks in 2015 and beyond.
  6. Professionals

    How to Know When to Pass on an Investment

    Knowing what to invest in is important, but knowing what not to invest in is equally important. Here's how to decide when to walk away.
  7. Investing News

    Understand the SEC Rules on Equity Crowdfunding

    The SEC's adoption of equity crowdfunding rules, initiated under the JOBS Act, enables small investors to invest in companies that show early potential.
  8. Investing Basics

    Tax-Efficient Strategies For International Clients

    In a globalized world, international clients seek to diversify holdings by accessing U.S. markets. Creative strategies will help optimize tax positioning.
  9. Professionals

    Do Bear Market Funds Make Sense for Investors?

    Bear market funds have their place. But are they right for individual investors?
  10. Stock Analysis

    5 Dividend Stocks that Should Be on Your Watchlist

    These stocks might not appreciate in a broad market selloff, but they're fundamentally sound and offer generous dividends.
  1. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  2. How can I hedge my portfolio to protect from a decline in the food and beverage sector?

    The food and beverage sector exhibits greater volatility than the broader market and tends to suffer larger-than-average ... Read Full Answer >>
  3. How attractive is the food and beverage sector for a growth investor?

    The food and beverage sector is attractive for a growth investor. The sector's high degree of volatility means it tends to ... Read Full Answer >>
  4. What techniques are most useful for hedging exposure to the insurance sector?

    Investing style determines the best hedging techniques for the insurance sector. This sector comprises three segments, two ... Read Full Answer >>
  5. What is the formula for calculating the receivables turnover ratio?

    To calculate a company's accounts receivable turnover ratio, start with the net receivable sales for a given time period, ... Read Full Answer >>
  6. How can I hedge my portfolio to protect from a decline in the retail sector?

    The retail sector provides growth investors with a great opportunity for better-than-average gains during periods of market ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  2. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  3. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  4. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  5. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  6. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!