Three Stocks With Multi-Day Losses That Could Continue

Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

The majority of stocks traded higher on Tuesday thanks to massive gains in the market.  However, there were a few exceptions; stocks that traded with a fairly significant loss despite the market’s large gains. Therefore, I am looking at such stocks, but more specifically stocks trading with multi day losses that might indicate a further downtrend.

Despite strong year-over-year growth and expected growth in 2013, shares of Cabela's (NYSE: CAB) fell lower by nearly 6% due to the concerns regarding gun control, making its three day loss nearly 13%. Much of Cabela's sales come from guns and ammunition, but with uncertainty regarding future policy investors are preparing for a worst case scenario. However, just because gun control might tighten doesn’t mean that guns will cease to exist. Cabelas will still return sales, and is fairly cheap compared to fundamentals. Therefore, Cabela's might present value at this level.

Much like Cabela's, shares of Sturm, Ruger, & Company (NYSE: RGR) fell lower by nearly 8%, making its three day loss almost 15%. The fear of gun policy continues to weigh on the stock, and at this point we have no idea how strict policy may become. Seeing as how RGR is purely a gun and ammunition company it would be more affected by policy, meanwhile Cabela's diversified product line largely insulates the company from this risk. Therefore, despite its 3.10% yield, it is possible that the worst is still yet to come, and at that point, RGR might be a buy.

Yelp (NYSE: YELP) continued to fall 4.60% on Tuesday, making its three day loss 8.14%. The outlook for Yelp is growing dim due to fears over a new Facebook feature that provides local businesses to users based on the user’s preferences. Yelp investors continue to reiterate that the company has an unmatched reviews database. However, Facebook has over one billion users who “like” various services, products, or companies on a daily basis. Therefore, this appears to be an attempt on behalf of Facebook to monetize the preferences of its users. And with Yelp trading at a valuation that requires perfection this could be a bigger hit than Yelp investors realize.

The loss of these three companies wouldn’t be a big deal if not for the large gains that the market has posted during the same period. The performance implies that the downside could be far greater in the coming weeks. As a result, I would personally avoid these stocks. There looks to be better value elsewhere in the market, with better trends, and less questions surrounding their immediate future.


BrianNichols has no positions in the stocks mentioned above. The Motley Fool owns shares of Sturm, Ruger & Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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