The biggest market disasters of 2022

Coinbase Global Inc. tops the list of stock market disasters this year. Here are the stocks that have fallen the most through Dec. 16, of all stocks with a market value of $5 billion or more. Stocks are tracked by their symbol and year-to-date loss:

Coinbase Global Inc., COIN, 85.5%

Lucid Group Inc., LCID, 80.6%

Every year, I sift through the rubble of the market and usually find one or two titles to recommend. This year, I like two of the five biggest losers.

Coinbase, based in Wilmington, Delaware, is the largest cryptocurrency exchange in the United States. Its rival, FTX, has just exploded in spectacular fashion (and its CEO, Sam Bankman-Fried, has been indicted for fraud).

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Normally, the implosion of a rival company would help a company’s stock. This hasn’t helped Coinbase, likely because the FTX debacle is undermining people’s confidence in crypto, in general.

Cryptocurrencies – and by extension, crypto exchanges – have two big problems. One is the frequent theft of crypto wallets. The other is the threat of tougher regulation or even bans by various governments. Given these issues, I think Coinbase will have a chance to match the market in the coming year.

Snapchat is a social media site that allows people to chat and exchange photos, with text and images disappearing after a while. It claims 363 million daily users.

Benefits? Not yet. Analysts believe the company will break even in 2023.

Future success depends on attracting more listings, which may be difficult if we have a recession in 2023. I expect the stock to perform roughly in line with the overall market.

Twilio, a San Francisco-based enterprise software company, facilitates interactions between telephone systems and the Internet. He has a long list of business clients, including Airbnb, Dell, Uber and Lyft.

Like Snap, Twilio is not yet profitable, but analysts expect profitability in 2023. Twilio enjoys a strong balance sheet, with debt at just 12% of the company’s net worth (book value) .

Twilio’s stock price is only 0.79 times book value. I consider any ratio below 1.0 to be attractive and cheap. Of the 36 Wall Street analysts who track the stock, 21 rate it a buy and 15 don’t. I vote with the optimists here.

Lucid Group, of Newark, Calif., manufactures the Lucid Air electric vehicle. Proponents say Lucid’s car is ahead of Tesla in its range before charging, speed and acceleration.

But Tesla and some traditional automakers beat Lucid to market. In the first nine months of 2022, Tesla held nearly 68% of the U.S. electric vehicle market. Lucid, like many other newcomers to the field, had less than 1%.

The company sold $27 million worth of cars last year. Analysts expect that number to jump to $5.2 billion in 2024. I like that as speculation – crude speculation, of course.

Roku is a service that allows users to stream movies, TV shows, and videos at a discounted price. It holds a large chunk of the US streaming market.

The company recorded six losses in 2015-2020. It made a profit in 2021, but the last three quarters have returned to loss status. Only 13 of the 32 analysts who follow the stock recommend it. I guess the company will have a little more trouble in 2023.

The column you are reading is the twelfth in a series. I looked at the five biggest market losers every year starting in 2011. Every year I found at least one title to recommend, and some years as many as three.

Over the previous 11 outings, my picks have averaged a return of 26%, compared to 10.7% for the Standard & Poor’s 500 Total Return Index.

Keep in mind that the results in my column are hypothetical and should not be confused with the results I get for clients. Also, past performance does not predict the future.

My picks only beat the index four out of 11 times. Yet, over the four winning years, my picks have increased by more than 100%. Hence the average gain of 26%.

Last year, I recommended avoiding four of the five biggest losers. The ones I told to stay away were down, on average, by 60%. The biggest loser, Ring Central Inc. (RNG), fell 79%. “I believe it’s an ongoing train wreck,” I said in December 2021.

If only I had said to avoid the five losers of 2021! I recommended Altice USA Inc., a broadband provider in several rural areas and in New York. It’s down 75%.

In comparison, the S&P 500 fell 14.3% between December 20, 2021 and December 16, 2022. All figures are total returns including dividends.

Disclosure: A hedge fund I manage has a short position in Ring Central.

John Dorfman is president of Dorfman Value Investments LLC in Boston. He can be reached at [email protected].

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