While investors experienced a volatile and swiftly moving market in 2011, the S&P 500 Index ended flat for the year. Yet, many stocks did much worse than the broad market, reminding investors of the risk involved with investing in the equity market.
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The worst performing stocks in the S&P 500 in 2011 were spread across various sectors, including technology, basic materials and the services group.
First Solar (Nasdaq:FSLR) topped the list of worst performing S&P 500 stocks in 2011, dropping 74% for the year. The industry has suffered from severe price erosion for its products as competition from Chinese companies intensified in 2011. There has also been a sharp reduction in government subsidies for solar projects and several high profile bankruptcies during the year.
These conditions have led to negative earnings momentum for First Solar in 2011, with consensus estimates dropping from $8.96 to $5.85 per share over the last 90 days. Earnings were also expected to drop in 2012, with First Solar guiding diluted earnings per share to be in a range from $3.75 to $4.25.
MEMC Electronic Materials (NYSE:WFR) lost 65% of its value in 2011, as the company's solar business also suffered from these conditions. The company has seen the average earnings estimates for 2011 drop from 85 cents to 37 cents per share over the last three months. The company is attempting to cope with the reduced business, and in late December 2011 MEMC Electronic Materials announced a restructuring that the company hopes will cut expenses by $200 million by the end of 2012.
Alpha Natural Resources (NYSE:ANR) and Monster Worldwide (NYSE:MWW) also had a terrible year, with both stocks falling 66% in 2011.
Alpha Natural Resources kicked off 2011 with the announcement of a merger with Massey Energy Company in a deal valued at $8.5 billion. The coal company touted the complementary assets of the combined entities, as well as its leading position in the metallurgical coal market.
Since those heady days earlier in the year, the stock has headed straight down, finally bottoming out in the fall of 2011, as investors expressed general concern over the prices paid for acquisitions in the industry. Late in the year, Alpha Natural Resources and several other coal companies reduced coal shipment guidance for 2011 as demand from Asian customers dropped unexpectedly. (To know more about acquisitions, read Analyzing An Acquisition Announcement.)
Monster Worldwide was up higher in late 2010, reaching $24 per share, as investors became optimistic on the improving economy. This optimism soon faded as the weak job market along with sluggish employment growth continued to plague the economy. The stock quickly gave up these gains and much more, settling into the high single digit range by the end of 2011.
If Hollywood ever makes a movie about Netflix (Nasdaq:NFLX), one title to consider might be The Death Of A Growth Stock, as this once loved stock fell 61% in 2011. Netflix's performance during the year was partly due to the company's controversial pricing and rental subscription policy changes announced in the middle of the year.
The storm of protest that erupted laid the groundwork for the reversal of growth later in the year, when Netflix reported that the company would lose 600,000 subscribers in the quarter ending Sept. 30, 2011, rather than the gain of 400,000 that it was expecting.
The Bottom Line
Investors had a wild ride in 2011, with the market experiencing its typical periods of euphoria and depression, depending on its mood. Although the S&P 500 ended flat for the year, the owners of these five stocks were not so lucky and did much worse. (For additional reading, check out 5 Must-Have Metrics For Value Investors.)
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At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.