Scraping The Bottom Of The Barrel: The Bad

Whenever a stock is approaching its 52-week low, it can mean one of two things.  It’s either a business that is starting to see the wheels fall off and should be avoided like the plague or the markets have overreacted and you now have a wonderful opportunity to buy a great company. 

In this the first of a 2 part series we will look at eight stocks that are trading at or near their 52-week lows.  Today’s article will focus on the stocks which are justified at trading at such a low price.  While tomorrow’s article will focus on those stocks which provide large upside potential at their current low prices. 

Orbitz

Orbitz continues to face intense competition from market leader Priceline as well as strong economic headwinds as record high airfares seem to be discouraging travel.  Recent comments from competitor Expedia just confirms the belief that U.S. consumers are becoming more hesitant to take expensive vacations.  Therefore, it is very likely that we will see some disappointing news over the next few quarters as vacationers cut back on their travel plans.

Blue Nile

It wasn’t too long ago that Blue Nile was the darling of Wall Street and trading at over $100/share. A total victim of the recent economic meltdown, their shares now are approaching $30. It’s never good to be a luxury retailer in a economic downturn and so it’s hard to see NILE’s stock price increasing in the near future.

Travel Zoo

Travel Zoo is one of those company’s with an impressive business model, but of late has seen it’s share price decline from $28 to $7.  Their main product is selling advertising in a weekly email that is sent out to over 12 million subscribers.  However, over the last few quarters they have seen profitability hurt as they try to expand into Europe and Asia-Pacific.  These expansion efforts have been very costly, while producing limited top-line results.  Expect the share price to remain depressed until a break-through is seen in their international expansion efforts.

Monster

Rising unemployment rates indicate that Monster may experience some tough sledding over the next few months.  The recent slew of announced layoffs reinforce the perception that company’s are cutting back on their hiring.  The lack of demand for their services could keep downward pressure on Monster’s share price for the coming months.   

So just because a stock is trading at it’s 52 week low doesn’t mean that it is a good opportunity to buy.  However, in tomorrow’s feature we will take a look at 4 stocks that appear to be undervalued while trading close to their 52-week lows.

At the time this article was published, the author did not have a financial position in any of the stocks mentioned in this article.

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