The worst performing stocks in the S&P 500 in November 2011 were a diverse group of companies across the retail and technology sectors. The proximate cause of the sell-off for these companies were weak financial results or disappointing guidance. (To know more about factors that affect stock prices, read: Forces That Move Stock Prices.)
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Abercrombie & Fitch (NYSE:ANF) was one of the worst performing stocks in the S&P 500 in November 2011, falling 35% for the month. Earlier in the month, the company reported disappointing sales for the third fiscal quarter due to weakness in Europe.
Two weeks later, Abercrombie & Fitch reported earnings per share of 57 cents for the third fiscal quarter, missing consensus earnings estimates by 14 cents per share. Management at Abercrombie & Fitch attributed the shortfall to a promotional strategy that the company pursued during the third quarter. This price cutting strategy was reflected in the company's gross margin for the quarter, which fell 360 basis points to 60.1%.
This discounting culture is still at work in the retail area as December began with Aeropostale (NYSE:ARO) missing third quarter earnings by 2 cents per share due to similar promotional issues.
It has been a slow deliberate decline all year for MEMC Electronic Materials (NYSE:WFR) and November was no different as the stock fell 30% for the month. Weak financial results appear to be the cause, once again, as the company missed analyst's estimates by 7 cents per share in the third quarter, and also lowered full year revenue guidance for 2011.
Although Computer Sciences (NYSE:CSC) and Sears Holdings (Nasdaq:SHLD) operate in completely different businesses, both stocks dropped 22% for the month after committing a faux pas on either earnings or guidance.
Computer Sciences exceeded consensus estimates for the third quarter by a wide margin, but followed up on that achievement with a reduction in financial guidance for 2011. The company slashed earnings per share guidance to a range of $4.05 to $4.10 per share, down from the previous range of $4.70 to $4.80 per share given in August 2011.
Sears reported a net loss in the third quarter along with a decline in same-store sales across almost all of the company's brands. The earnings report also triggered a downgrade by Standard & Poor's on the company's debt to a B rating.
Some investors are expecting more bad news from Sears, as 30% of the stock's float is sold short, as of November 28. This makes the company the second most shorted stock in the S&P 500 Index.
The Bottom Line
Market pundits claim that earnings mean everything and this was amply demonstrated in November as the worst performing stocks for the month reported weak financial results, or lower guidance, going forward. Investors should look through these names to see if there are any buying opportunities for 2012. (For additional reading, check out: How To Pick A Stock.)
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At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.