If you were a betting person, this could be the unluckiest hand you could draw: three stocks that can be had for less than $2 and a pair of stocks that can be had at around $3. Although the stocks vary across industries, they bear similar problems -- including a rapidly declining stock price and a potentially unsustainable debt burden. Without further ado, here they are:
Three for $2
Genworth Financial (GNW): This Virginia-based insurance company has seen its shares fall 80% over the last year. The company announced earnings last week, reporting a net loss of $292 million, or $0.44 a share. Genworth also said it planned to suspend sales of its traditional life insurance and fixed annuity products and that it was isolating its long-term-care business. The company's earnings triggered credit downgrades by Fitch and Standard & Poor's. The latter of which critiqued Genworth's focus on "mortgage insurance and long-term care -- two businesses that have exhibited significant volatility historically." Indeed, not only are those business segments volatile, Genworth's stock has fallen 55% since the start of the new year and is now trading below $2.
Chesapeake Energy (CHK): This Oklahoma-based oil and natural gas company also has a spot on Real Money's "Stressed Out" index. Its stock fell below $2 this week on reports that the company hired restructuring attorneys. Although the company released a statement in which it said it had "no plans" to file for bankruptcy and that it had been working with its counsel since 2010, investors are still jarred by the company's debt load, and the stock has not recouped all of its losses based on earlier reports.
Ultra Petroleum (UPL): This Texas-based company is also a member of Real Money's "Stressed Out" index. Its stock is down 90% over the last year and fell 12% in Tuesday's trading. The company has a $62 million note coming due March and as of the company's third quarter figures, it only had $25 million in cash. In a filing with the Securities and Exchange Commission, the company acknowledged that it could face difficulty remaining in compliance with its debt covenants if low energy prices persist. Shares are currenly trading under $2.
Two for $3
SunEdison (SUNE): This Missouri-based renewable energy company has been struggling over the last year. Its shares have fallen 87% over that period, with much of the drop coming after the company announced plans to acquire Vivint Solar (VSLR) in July and after it was revealed that activist investor, David Einhorn of Greenlight Capital, shed some of his position in the third quarter. Since then, SunEdison has become the target of a lawsuit filed for David Tepper's Appaloosa Management, for breach of fiduciary duty to shareholders of its yieldco, TerraForm Power (TERP), tied to the Vivint acquisition. Shares are currently trading below $3.
Petroleo Brasileiro (PBR): Brazilian-based Petrobras has the double distinction of being a part of Real Money's "Stressed Out" index and also a nominee for TheStreet's "Worst Stock in the World" competition. Shares of the company are down 52% over the last year. Not only is the company's credit rated "junk," by S&P, but the country it is based in also bears a "junk" rating. The company has debt payments totaling $23 billion between now and 2017 and analysts at J.P. Morgan Securities believe Petrobras will have to tap debt or equity markets to meet those obligations. However, given the company's stock price and credit rating, getting financing will likely be difficult. The stock is hovering around $3.
Should an investor hold a full house of these stocks, it may be best to fold.