No matter how good a company might be, a plunging share price is usually enough to get all but the most hardened investors wondering about the state of their investment.
The following three companies are the biggest large-cap losers in the S&P/ASX200 (INDEXASX: ^AXJO) (ASX: XJO) over the past year – or at least, the biggest losers that didn't fall so far they dropped into small-cap territory.
Vocus Communications Limited (ASX: VOC) – down 45% since January
Shares in Vocus have been pummelled for a number of reasons, which we covered here, here, and here. Surprise resignations and underperformance at recent acquisitions means Vocus has it all. After it made so many acquisitions it's hard to puzzle out Vocus' underlying performance, and the company carries a fair chunk of debt. Management has also noted that its customer service is below par, which isn't helping things.
Yet the precipitous share price drop is overlooking the company's ongoing investment in new fibre cables, as well as the potential for the company – and telecom utility – to generate reliable earnings growth for decades into the future, much as Telstra Corporation Ltd (ASX: TLS) has done. In that sense I think the sell-off is overdone and long term investors are likely to be rewarded.
Virgin Australia Holdings Ltd (ASX: VAH) – down 52% since January
Virgin shares started plunging after its half-year report in February, which saw the company swing from a loss to a profit. However, prices of $0.48 per share at the time were pretty high for a ~$3 billion company that earned $45 million in profit for the half year. The full year results swung back to a $200 million loss, effectively baking in Virgin's current low share price.
In addition to a competitive industry, most of Virgin's shares are owned by strategic holders like Etihad Airways. Retail shareholders have very little say in the company. Even at today's prices, I wouldn't touch Virgin.
Blackmores Limited (ASX: BKL) – down 45% since January
Blackmores has been sold off after management announced a weak first quarter result, and shares have remained flat, despite the company's great balance sheet and respectable price. With minimal debt, a foothold in the lucrative Chinese market, and valued at 20 times last year's earnings, Blackmores appears to be in a good position going forwards. Management is experienced, and indeed company insiders hold a majority of the shares on issue, which can cause a volatile share price at times.
On the whole, Blackmores looks appealing, but its first quarter profits came in nearly 50% lower than the first quarter last year. Thus I think investors should wait to see if performance will improve before committing to the company today.
