3 stocks that crashed 20% this week


The S&P / ASX 200 Index (Index: ^AXJO) (ASX: XJO) has ended the week down 2.2%, including a fall of 0.8% today. Wall Street has suffered similar falls, with the Dow Jones Industrial Average down 1.7%, and the S&P 500 down 3%.

It appears that investors are still concerned about the European Debt Crisis, and the looming ‘fiscal cliff’ in the US, and some commentators have questioned whether the strong run the market has experienced since June (up 12% before this week), was supported by fundamental company earnings and outlook.

For the week, these three stocks have suffered falls of over 20%.

IT consulting business, SMS Management &Technology (ASX: SMX) saw its share price hammered down 24.8% to $4.94 – seeing its value shrink $116 million in the process – after the company announced that it had lost some major contracts and elsewhere it was seeing weak demand from the ICT and government sectors. That resulted in the company’s growth dramatically stalling in the last two quarters. This illustrates one of the main risks with consulting and contracting businesses – there’s no guarantee that a contract will be renewed, and it can be difficult to replace a long-term contract, especially if it was a large one.

Engineering company, Matrix Composites & Engineering (ASX: MCE) fell 22.1%, including 14.7% today, after the company announced a profit downgrade on the back of delays in orders, and a softening of demand for some products. As a result, the company is reducing production of buoyancy products, cutting shifts in its factory and slashing staff numbers. It appears that the company may have been too optimistic about incoming orders, and it remains to be seen whether this is a serious issue, or just a short-term hiccup.

St Barbara Ltd (ASX: SBM) has suffered along with many of the listed gold stocks, losing 21.5% this week to close at $1.86. The price of gold fell below US$1,700 an ounce for the first time this quarter, but has since recovered slightly to be trading around US$1,711 an ounce. It didn’t help that the company reported a 21% fall in production in the quarter, due to issues at its Gwalia mine, and one of its mines coming to the end of its life.

The Foolish bottom line

Whether this is just a temporary pullback, or a sign of more falls to come, is not all that relevant for long term Foolish investors. While its disappointing to see your stocks and portfolios lose value, remember the famous words of Benjamin Graham: “In the short run the market is a voting machine. In the long run it’s a weighing machine.”

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Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned. The Motley Fool’s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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