When you have such a rip-snortin' performance like the Dow Jones Industrial Average put on yesterday, roaring ahead 308 points with every single component of the index rising again, you'd expect it would be difficult to find companies that suffered setbacks. Indeed, 85% of the stocks on the Dow, Nasdaq, and AMEX exchanges rose yesterday, with even troubled tech bellwethers Intel and Hewlett-Packard rising 3% or more on the day.
Yet, it does mean 15% of the listed stocks did manage to come up short and, while the three companies below managed to miss the new year party, it may now be exactly what it seems.
Don't go running over the cliff with them like a bunch of lemmings: it could just be a temporary situation. Let's first see whether they had good reason to fall, as panic-fueled routs can sometimes lead to excellent buying opportunities.
C'est la vie!
The case of Abbott Labs is just that its price was adjusted for the spinoff of its pharmaceutical unit, AbbVie . Investors not paying attention would have received quite a shock upon looking up their stock's price, thinking it had been cut off at the knees. Instead, they received one share of AbbVie for every one they held of Abbott. The remaining business will now focus on medical devices, nutrition, and generic drugs, while the arthritis drug, Humira, will largely drive the pharmaceutical spinoff.
That's a $9 billion a year business for AbbVie, but it goes off patent starting in 2017, so it will embark on a campaign to acquire a new drug pipeline to sustain itself going forward . In the meantime, though, investors will be riding the coattails of that one drug, which will provide about half of its revenues, and 70% of its profits. Any stumbles will be harshly dealt with in the market until it can bring more promising candidates on board.
Abbott investors can be happy that their company rid itself of a riskier pharma business, and now they'll need to decide whether they want it in their own portfolios.
From headache to migraine
Too bad headphone maker Skullcandy didn't have a business it could spin off. On the day I reiterated my concern that mounting competition imperiled its chances for growth and was causing it to resort to discounting to move products, analysts at Jeffries did a 180-degree turn, changing their view from "buy" to "underperform" -- at least it wasn't a "sell," right? -- for exactly the same reasons .
It should have been apparent for some time that the ear-bud style of headphone was at most risk, particularly after Apple introduced an improved version. As that segment accounts for 60% of Skullcandy's revenues, the ease of rivals to enter the business, including cheap knockoffs, should have sounded the alarm far sooner on Wall Street.
As I said yesterday, "it's quickly been commoditized and offers no real benefit. Avoid the stock in 2013, just as you should have in 2012."
Disconnect from opportunity
There was no company-specific news to account for the drop in NII Holdings yesterday, but I've been leery as well of the Brazilian wireless communications operator for some time, because it is going up against larger, better-financed rivals from around the world. Spain's Telefonica owns 30% of the market through Vivo Participacoes and is the largest telecom in Brazil, followed by Telecom Italia's TIM Participacoes , and Mexico's America Movil , at approximately 25% each. The balance is made up of smaller players, including NII, which market's Sprint's Nextel brand south of the border.
Despite initial published reports that the government had signed off on NII's acquisition of Unicel do Brasil Telecomunicacoes -- a move that would greatly expand its capacity -- a magazine recently published a rumor that it now won't get the Brazilian government's support, and would represent a big setback for its chance to grow, as limited as that might be overall.
Nothing's happened since to change my opinion of NII underperforming the market as a whole, but let me know in the comments section below if you think it can ring up new profits in 2013.
Ready for a resurrection
Wondering about that new position in your portfolio? For some Abbott Labs shareholders, the new year brought with it a new company called AbbVie. Formerly Abbott's branded pharmaceuticals business, the new company's shares were distributed to investors on Jan. 2. To help investors better understand the situation, the Fool has created a brand new premium report on both stocks. Inside, we outline all of the must-know opportunities and risks facing both companies, so make sure to claim this report by clicking here now.
The article 3 Stocks That Missed the New Year's Party originally appeared on Fool.com.
Rich Duprey owns shares of Apple and Intel. The Motley Fool owns shares of Apple, Intel, and Skullcandy. Motley Fool newsletter services recommend Apple and Intel. 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.
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