posted on 14 October 2016
by Staff Reports Money Morning, Money Morning
-- this post authored by Cameron Saucier
Although the stock market has been hitting record highs this year, not all companies have been enjoying the ride.
Five companies in particular have been slammed and are the worst-performing S&P 500 stocks in 2016.
We've put together a list of those companies as a warning for investors. But just because a stock is tanking, doesn't mean investors can't still profit…
In fact, Money Morning Global Credit Strategist Michael Lewitt, a former hedge fund and wealth manager, has turned targeting bad-performing stocks into a winning investment strategy. He has already banked triple-digit profits from some of the most embattled companies on the market.
And for the first time ever, we're sharing Lewitt's investment strategy with readers. But first, let's look at our list of the five worst-performing S&P 500 stocks in 2016…
5 of the Worst-Performing S&P 500 Stocks in 2016
Worst-Performing S&P 500 Stocks No. 5: Alexion Pharmaceuticals Inc. (Nasdaq: ALXN)
Alexion develops drugs for rare disorders and diseases, like hemoglobinuria.
ALXN stock is down 35% year to date (YTD), and a good portion of the stock's woes can be attributed a failed phase 3 test for one of its hyped drugs, soliris, on June 6. The study failed to achieve statistical significance. What's more, four patients in the study (about 6.5% of the participants) had to discontinue the medication from an adverse reaction, according to Reuters.
After Alexion released the study's results, ALXN dropped from $154 per share to a low of nearly $112 per share on June 24. That's a decrease of 27%.
Despite the big letdown from this study, Alexion still is a solid company. While it has a lot of long-term debt ($3.2 billion as of last year), its debt pile is nowhere near that of companies like Valeant or Endo. Its sales also topped out at $2.4 billion last year - the highest ever for the company.
ALXN is currently trading at $123 per share as of Oct. 7 intraday.
Worst-Performing S&P 500 Stocks No. 4: Signet Jewelers Ltd. (NYSE: SIG)
Signet sells jewelry and watches in the United States, Canada, and the United Kingdom. Year to date, SIG is down nearly 34% as of Oct. 7.
For the past two quarters, shareholders have punished Signet for missing its revenue estimates and other lackluster sales results. In its second-quarter earnings report, the jeweler reported same-store sales were down 2.3%, and total sales were down 2.6%.
Signet CEO Mark Light admitted in the same report that his company is facing "uncertain conditions."
It seems the company is trying to make a turnaround, though. It announced in August that private-equity firm Leonard Green took a $625 million stake in the company. Most analysts expect Signet to use a portion of that cash injection for share buybacks.
SIG is currently trading at $80.50 as of Oct. 7 intraday.
CF Industries makes nitrogen fertilizer and other nitrogen products.
The company's stock is down 41% YTD, but really started declining after its last quarterly earnings report in June, when it reported a 13.5% decrease in sales for the quarter. The company also missed Thomson Reuters' consensus earnings estimate of $0.68 by $0.35.
CF Industries' bottom line has also shrank significantly within the past five years. In 2011, it reported $1.5 billion in sales, compared to 2015, when it reported $699.9 million in sales. That's a decrease of 53%.
Investors simply don't see much growth for CF Industries right now…
CF is currently trading at $24.07 as of Oct. 7 intraday.
Worst-Performing S&P 500 Stocks No. 2: First Solar Inc. (Nasdaq: FSLR)
First Solar designs and sells photovoltaic energy solutions. Despite having a price/earnings ratio of just 5.8 and being quite profitable, FSLR is still down nearly 43% YTD as of Oct. 7.
As of June 2016, the company reports a net income of $698.2 million with nearly $3.9 billion in sales, according to FactSet. With those kinds of numbers, FSLR's performance this year doesn't seem warranted. But there's more to the story…
Since the company deals in the utility industry, it's subject to the industry's mandates and goals. And utilities have already met their demands for the next few years, according to data from S&P Global Market Intelligence. So First Solar likely won't see much bottom-line growth until after 2019.
It's no wonder investors responded to the company's second-quarter earnings results by unloading shares in August, when the stock fell nearly 19%. Although its results weren't all bad, most investors noticed the slowdown in projects for the next few years.
The company has just 303 MW of projects ready for completion by 2017, and just 40 MW of projects due for completion by 2019…
FSLR is currently trading at $37.51 as of Oct. 7 intraday.
Continue reading to see the worst-performing stock in the S&P 500. This company is loaded with debt, and its future looks bleak…
Worst-Performing S&P 500 Stocks No. 1: Endo International Plc. (Nasdaq: ENDP)
Endo International is a pharmaceutical company that develops drugs in the areas of urology, oncology, endocrinology, and orthopedics.
ENDP stock is down over 66% YTD. Many analysts have criticized the company for embarking on an ambitious merger-and-acquisition spree, similar to drug maker Valeant Pharmaceuticals International Inc. (NYSE: VRX).
Regulators have targeted both ENDP and VRX for relying on haphazard acquisitions and price hikes to drive growth.
And now, ENDP has an over $8.2 billion debt pile that its comparatively miniscule $567.8 million in free cash flow can't cover, according to FactSet.
Investors have been unloading shares as Endo's business model breaks down. Many expect the company will need to start selling off assets to reduce its long-term debt.
ENDP is currently trading at $20.33 as of Oct. 7 intraday.
Your Opportunity to Profit from Troubled Stocks
Michael Lewitt has found a way to profit off the worst stocks on the market - stocks very similar to the ones you've just read about.
In fact, he plans on making big gains from some of the most troubled companies in the market. And for some, he already has…
But it's not too late for you to get in on the action…
For the first time, Lewitt is sharing his counterintuitive strategy with Money Morning readers.
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