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Q3 recap: 5 biggest losers on the S&P 500

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It’s been a banner year for the Standard & Poor’s 500, with the overall index up by more than 12 percent heading into this week’s two-day Sandy-related market close. But as the superstorm showed, into every life a little rain must fall. Several stocks on the S&P have suffered devastating losses this year. Here are the five biggest losers of 2012, and how they managed to buck the year’s trends.

No. 5: Electronic Arts (EA), down 42.2 percent on the year

It’s been hard times for the videogame industry, which has been fending off competition from free online games, such as those put out by Zynga, which is closely allied with Facebook. Game sales fell 8 percent in 2011, and then proceeded to drop even further this year, with sales down a whopping 20 percent through the beginning of September.

Electronic Arts, one of the giants of the gaming world, has felt the brunt of the blow. Its big game for this year, Star Wars: The Old Republic — which cost a staggering $200 million to develop — was introduced  as a $15-a-month online game. But the game lost more than 400,000 paying players in its first two months out of the gate, and overall sales were so dismal the company shifted the model to free play after just ten months on the market. Then the company’s big fall/Christmas title, Medal of Honor: Warfighter, was such a critical disappointment that it drove down earnings. “Our Q3 looks soft mostly due to ‘Medal of Honor,’” CEO John Riccitiello said in a conference call. There are also messy patent infringement suits pending with Zynga.

After opening the year at 21, EA bottomed out in late July at just over 10. Late-year releases of long-time popular games like Madden 2013 and FIFA soccer helped cushion the blow, pushing the stock back up to 12 as of earlier this week.


No. 4: Allegheny Technologies (ATI), down 44.1 percent on the year

Allegheny, a metals processor that makes products for the aerospace and petrochemical industries, is getting rolled by the global macroeconomy. Its third quarter profits fell by 43 percent in an earnings report released last week, capping off a year in which the stock has slid pretty much the entire time. Much of the company’s business is in China and Europe, and the sluggish economy in both areas has been a serious drain on its coffers. The company’s cash flow has been dribbling away into nothing; at one point, its free cash flow was a minuscule 0.4 percent of revenues.

ATI was over 50 in January, but fell back all the way to 28 in late June as the cash-flow problems became apparent. It rallied up to 36.75 in mid-September, but the recent weak earnings report has sunk it to a new yearly low of 26.7.

Photo: A fisheye lens attached to an electronic still camera was used to capture this image of NASA astronaut Sunita Williams, bottom, during the mission’s third session of extravehicular activity Wednesday Sept. 5, 2012. Allegheny Technologies makes products for the aerospace industry. (AP Photo/NASA


No. 3: Hewlett-Packard (HPQ), down 45.3 percent on the year

Hewlett-Packard has been a basket case for a couple of years now. As recently as April 2010, it looked solid, with a share price surpassing its pre-crash peak. But it lost nearly 40 percent of its value in 2011, and has lost more than that already in 2012. Since touching its all-time high of 53.75 on April 12, 2010, the stock has lost nearly three quarters of its value.

HP is still the world’s leading seller of computer, sprinters and servers, but its profits margins have been shrinking fast — they’re at  7 percent, but the company forecasts they’ll drop to somewhere between zero and 3 percent. It recently reported not just the worst loss in its history but an $8 billion writedown from its acquisition of Electronic Data Systems in 2008. Despite announcing 29,000 layoffs, CEO Meg Whitman, fresh from eBay and an abortive run for California governor, says it will take at least until 2016 before the company gets to where she wants it to be.

Photo: (AP Photo/fls/Thomas Kienzle)


No. 2: Advanced Micro Devices (AMD), down 61.7 percent on the year

AMD, one of the oldest computer chip makers in Silicon Valley, actually started out strong this year, with its stock rising by more than 50 percent between January 1 and March 15. But with the personal-computer market shrinking — units sold will slip by about 1.2 percent this year — AMD, which relies on PCs for 85 percent of its sales, is struggling to find sales. It’s been trying to penetrate the tablet market, but has not done so yet. As a result, its cash on hand, nearly $1.8 billion in the second quarter, is projected to drop to around $600 million by this time next year. 

The company guided earnings estimates lower for the third quarter, then missed them anyway, with EPS dropping by 62 percent from a year earlier. At the same time, it announced it was laying off 15 percent of its workforce, and that it expected revenue to decline 9 percent more in the fourth quarter. Since March 15, AMD has now lost 75 percent of its value.

Photo: (AP Photo/Paul Sakuma)

University of Phoenix

No. 1: Apollo Group Inc.  (APOL), down 63.39 percent on the year

It’s easy to spot when the Apollo Group’s troubles began this year: The for-profit education company announced at the end of February that enrollment growth at its prime subsidiary, the University of Phoenix, was falling far short of expectations. That was the first sign of serious financial fallout from a new set of 2011 federal rules threatening to cut financial aid for students at colleges with unsustainable debt loads. Since students at for-profit colleges account for only 13 percent of the nation’s college students but 47 percent of their defaults on student loans, this did not bode well for the Apollo Group’s business model. The stock dropped 16 percent in a single day.

The company has continued to lose ground throughout the year, with fourth quarter revenues down 11 percent from the year earlier. The company founder and chairman, John Sperling, and his son Peter, a director, have sold $367 million worth of their stock in the past two years, while the share price has slipped by more than 60 percent. In the spirit of the University of Phoenix, let that be a lesson to you.

Photo: (AP Photo/Matt York)

For more from Tom Nawrocki, see:

What the markets say about the election (and vice versa)

The tales of 9 stocks that doubled

America’s 10 biggest IPOs