Worst Stocks From February

Disappointment was the common theme of the worst performing stocks in the S & P 500 in the last month, as fast moving investors dumped the shares after these stocks missed earnings estimates or cut outlooks for 2010. (Find out how to keep your capital losses small and let your winners run. Read The Art Of Cutting Your Losses.) IN PICTURES: Top 8 Estate Planning Mistakes

Tax Cut
H & R Block (NYSE:HRB) fell 21% in February 2010 after the company issued an earnings warning, telling investors that it would have difficulty meeting 2010 earnings guidance of $1.60-1.80 per share. The company said that more people were computing their own taxes during hard economic times or not filing at all due to unemployment. Some analysts, however, questioned HR Block's ability to maintain market share.

Lowered Guidance
Dean Foods (NYSE:DF) missed analyst estimates when reporting its fourth quarter, earning 31 cents vs. estimates of 37 cents. The company also lowered its guidance for the full year to a range of $1.54-1.64, compared to The Street's consensus of $1.69. The company blamed a sharp rise in the cost of butterfat in December 2009, and a shift to private label products for the miss.

Gregg Engles, the CEO of Dean Foods said, "In the fourth quarter, however, butterfat prices rose considerably from $1.23 in September to $1.55 per pound in December, significantly challenging Morningstar's profitability, as their pricing lagged this move into commodity. The first quarter of 2010 is also likely to be challenging for WhiteWave Morningstar, as butterfat costs have continued to rise in Q4." The stock finished the month down 19%.

More Misses
Avery Dennison's (NYSE:AVY) nightmare began on the last trading day of January 2009 when it reported fourth quarter of 2009 earnings of 44 cents per share, far below Wall Street expectations of 68 cents per share. This profit was a 17% increase from last year, but was not enough as investors abandoned the shares en masse. The stock fell 16% for the month.

Western Union (NYSE:WU) was down 12% in February 2010, and once again the culprit was an earnings miss and a disappointing outlook. The company cut its 2010 earnings view to a range of $1.29-1.34 per share from analyst expectations of $1.40 per share. The company blamed the weak economy and high unemployment for the miss.

Gamestop (NYSE:GME) is down 34.84% in the last year and was down 12% in February, as the video game retail company suffered from guilt by association events during the month. A report on January video game sales showed a 13% drop on a year-over-year basis. Two days earlier the stock was hit by a downgrade by an analyst at Credit Suisse who called the stock a potential "value trap." The final straw was disappointing earnings guidance by Electronic Arts (Nasdaq:ERTS), a major video game publisher.

Bottom Line
The market rally off the lows in March 2009 has increased investor expectations on many stocks in regards to earnings and revenue growth. This in turn has led to plenty of disappointment and corrective stock action when earnings and revenue don't quite reach those lofty aspirations. (If a company has been consistently reporting bad news and its stock has been in decline, a risky proposition would be to buy the shares. For more information, see 4 Tips For Buying Stocks In A Recession.)

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