Friday's Big Losers: Two to Buy & Two to Sell

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

The market traded considerably lower on Friday as the “Plan B” didn’t quite gain enough support to end the fiscal cliff drama. However, despite the market’s more than 1.0% loss, there were a select few that stuck out as being the worst of the worst. Therefore, I am looking at the worst of worst, to determine if any are worth buying.

<table> <tbody> <tr> <td> <p>Company</p> </td> <td> <p>Ticker</p> </td> <td> <p>Loss</p> </td> </tr> <tr> <td> <p><strong>Research in Motion</strong></p> </td> <td> <p><strong><span class="ticker" data-id="205221">(NASDAQ: <a href="">BBRY</a>)</span></strong></p> </td> <td> <p>(16.40%)</p> </td> </tr> <tr> <td> <p><strong>Micron Technology</strong></p> </td> <td> <p><strong><span class="ticker" data-id="204594">(NASDAQ: <a href="">MU</a>)</span></strong></p> </td> <td> <p>(8.00%)</p> </td> </tr> <tr> <td> <p><strong>Alcatel-Lucent</strong></p> </td> <td> <p><strong><span class="ticker" data-id="209682">(NYSE: <a href="">ALU</a>)</span></strong></p> </td> <td> <p>(6.00%)</p> </td> </tr> <tr> <td> <p><strong>Herbalife</strong></p> </td> <td> <p><strong><span class="ticker" data-id="206598">(NYSE: <a href="">HLF</a>)</span></strong></p> </td> <td> <p>(15.52%)</p> </td> </tr> <tr> <td> <p> </p> </td> <td> <p> </p> </td> <td> <p> </p> </td> </tr> </tbody> </table>
  • It looks as though those who have been buying RIMM on the notion of its revival were brought back down to earth on Monday, following its Q3 conference call. The company’s earnings weren’t bad, however the CEO’s comments about its services business facing pressure by a pricing haul that will come with the BB10 did not spark a continuation of excitement. The company’s recent rally had been due to optimism that its BB10 might actually be a game changer. However, the Q3 might be a good indication that it’s time to get out and that BB10 might not be so revolutionary after all.
  •  Micron fell lower after announcing its Q1 results, due to weak DRAM sales. The company missed bottom line expectations but revenue was inline. The company saw a decline in almost every metric related to its business, such as: DRAM sales, NAND sales, volume declines, prices, etc. Overall, I don’t see much to get excited about with the company’s report; especially considering the stock had rallied 25% in the month prior to Friday’s performance.
  • After a three week gain of more than 50%, shares of Alcatel-Lucent fell 6% after the S&P lowered its outlook to Negative, yet affirmed its “B” rating on the company’s debt. They now expect weaker margins and operating cash flow for the company, but still expect positive revenue growth and better operating margins for 2013. However, this outlook doesn’t make much sense compared to the guidance and expectations of most analysts. The company has clearly stated that it’s looking to downsize, eliminate segments of revenue that produce annual loss. Therefore, it doesn’t make sense that margins would be lower and that revenue would rise; it seems it would almost be opposite. Either way, the upside is great and this is a stock worth the “buy” due to its recent financing and its restructuring plan.
  • Shares of Herbalife have fallen nearly 35% in the final three days of last week; following a presentation and a short case made by Bill Ackerman who claimed the company is a pyramid scheme. Ackerman gave a good presentation and made a valid case, which is why the shares were pushed lower, however there are growing concerns regarding his motives. Ackerman owns puts due to expire at the end of the week, and is short 20 million of the total 24 million short interest. Therefore, Ackerman is the short of Herbalife, and has a huge interest in the decline of the stock. Whether he’s right or wrong is unknown, but in my opinion there are motives, and there has been a lot of longs hurt in the process. Furthermore,  the stock is trading at just 6.03 times next year’s earnings, therefore, I’d look into buying the stock following, what appears to be, one man’s greed.

In my opinion, Alcatel-Lucent is a definite buy, and Herbalife is worth exploring. Both Micron and Research in Motion still have too many problems, and I simply can not buy into the speculation. Yet because of loss each are cheap compared to fundamentals, and with any signs of optimism, each could go significantly higher. 

BrianNichols has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. 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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