March Mid Cap Losers

By Eric Fox | April 07, 2009 AAA

The worst performing March mid cap stocks are a disparate bunch. Other than poor performance, there's no clear pattern in the list of stocks, as they were in five separate industries including healthcare, energy, utilities, consumer staples and technology. (Learn more about market caps, read Determining What Market Cap Suits You.)

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Declines
Harris Corp
(NYSE:HRS) declined about 21% since March 2, 2009. The company sells military communications equipment to the government, and was downgraded during the month by analysts who felt that the company's business would suffer as the war in Iraq winds down. This poor relative performance occurred despite an announcement that the company has authorized a $600 million share repurchase program. This is approximately 25% of the company's market value. On the last day of March, the company said that it would spin off to shareholders the 32.9 million shares of Harris Stratex Networks, Inc. (Nasdaq:HSTX) that it owns.

McKesson (NYSE:MCK) was the second worst performer. MCK opened on March 2, 2009 at $40.45, but investors became concerned that one of the company's largest customers, Rite Aid Corp (NYSE:RAD) might default on its debt and see further challenges in the recession. Rite Aid was 13% of revenue for the company. McKesson is a drug wholesaler, and there are also worries that recent consolidation in the pharmaceutical sector would reduce McKesson's leverage with its suppliers. Recent merger announcements include Pfizer (NYSE:PFE) buying Wyeth Inc. (NYSE:WYE), and Merck & Co. (NYSE:MRK) buying Schering-Plough Corp. (NYSE:SGP).

Surprising Losses
Sunoco (NYSE:SUN) is a refiner and marketer of products in the U.S., and there was no specific news on the tape to explain its 11.44% price drop. The company has been involved in several contract negotiations with its unions and has also been laying off workers at several refineries. The price of crude oil has rallied during March but this doesn't necessarily help Sunoco's profits as the company's earnings are determined more by the spread between its input costs and its selling price. (Learn more in our Technical Analysis Tutorial.)

The 10.45% decline in Dean Foods (NYSE:DF) was a surprise. The company raised guidance at the end of February due to the fall in milk prices, but it appears that investors feel that milk prices have reached trough levels and may head up in 2009, hurting Dean's profitability. The stock had also doubled in price from its low of $11 in December 2008, so it was probably inevitable that some profit taking would occur.

Downgraded
Rounding out the list was Pepco Holdings (NYSE:POM), which was down 10.28% for the month. The stock was downgraded early in the month by several analysts, despite beating its guidance for the quarter. During its conference call Pepco said it was conducting a "strategic analysis" of its retail energy supply business. Also, due to the fall in the stock market, Pepco believes its pension expense will increase by $61 million, from $24 million in 2008 to $85 million in 2009. (These events offer the average investor a chance to hear management respond to analysts' hard-hitting questions, see Conference Call Basics.)

The Bottom Line
The five worst-performing stocks in March 2009 shared nothing in common except poor performance during a month in the market where virtually every stock was in positive territory.

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