Gasping for one last hurrah are several well-known, respected and usually reliable stocks that are living on life-support. In many cases, the recession is to blame for dropping stock prices. However, the largest culprit is usually a company's failure to adapt to market changes.
TUTORIAL: Stock Basics
Stocks That Just Won't Die
Many investors, large and small, have a portfolio that includes stocks that just "sit there." They don't face huge loses, but they don't show large gains. Walmart is an example of this type of stock, at least in the long term. Since 2004, Walmart stock has fluctuated within a $10 band. It has shown only an 11% increase in 10 years. Although Walmart's earnings have substantially increased over the same time period, its stock has not.
Walmart isn't alone in its stagnating stock price, Pfizer, Intel, General Electric, Ford and Time Warner are others whose gains have not kept up with inflation rates. These stocks have traditionally been considered safe, predictable stocks that are the "backbone" of many investors portfolios. Without showing any appreciable growth, many financial managers suggest you might want to consider selling these familiar stocks unless you're holding on for dividends. (For related reading, see 10 Tips To Clear Your Portfolio's Dead Weight.)
Cue the Death March
Regrettably, there are several well-known stocks on a rapid decline into oblivion. Each year, 24/7 Wall St. releases a list of brands that are on the decline. This year it has published the list twice as the economic woes are finishing off most of these companies very rapidly.
At the top of the list is Reader's Digest. After filing for Chapter 11 in 2010, reducing its number of issues per year, and restructuring the company, it doesn't look like anything is going to save the venerable American icon. (For related reading, see An Overview Of Corporate Bankruptcy.)
You might not be able to Yahoo much longer. Although stocks surged recently with news that Microsoft was making a bid for the search engine. Three years ago, Yahoo laughed at its offer. Since losing market share, and with Microsoft's Bing, Yahoo seems to be reconsidering.
Succumbing to pressure from rising Asian markets, the Droid onslaught, and selling smartphones in the U.S. without subsidies, Nokia may be the next large stock to fall. Pairing with Microsoft to use Windows 7 as its phones' operating system seems to have bolstered the struggling company. Yet, dropping prices in Europe and keeping smartphone prices in the U.S. in the $500 range are undercutting the Microsoft advantage. It'll be interesting to see what future models Nokia comes out with. In September, the Stoxx Europe index delisted the once giant electronics company. This means Nokia is currently not considered one of Europe's largest corporations. The only life-preserver that may keep Nokia in business is its lengthy list of highly lucrative patents.
Much like Nokia, Research in Motion (RIMM) was considered a tech giant in the wireless for business world. Then came Apple and Google Droid. Struggling to keep market share, RIMM's stocks have dropped by 59.2% over the last year. Spurred by a few wild stock rallies, the company hasn't been able to sustain any growth. With Blackberry sales down and PlayBook showing dismal sales, RIMM's future doesn't look bright.
Stocks on Life Support
Here are several more stocks that look to be making a departure to that great DOW in the sky.
An online company that did not adapt with the times, it lost more than $11 million because of a drop in dial-up service.
Borders and Books-A-Million
Pushed over by Amazon, these book stores didn't create an online presence. Combine that with the phenomenal increase in eBook sales and the days of these bookstores was numbered.
The Bottom Line
There are many reasons for stock collapse from poor management to the struggling economy. One of the biggest reasons for many of these once stellar companies seems to be their inability to not stay current with consumer needs. The companies stay with what has worked in the past without thought to what might lay ahead. For investors, it means you must constantly be diligent in your investments, sell even when the brand name is old and dependable, and like those corporations that continue to be profitable, change with the times. (For related reading, see Top 5 Stocks Back From The Dead.)