It will come as no surprise that two out of three companies in today's article are in the commodities sector, and have been hit hard by falling oil and iron ore prices, respectively.
But the third, a recent healthcare IPO, has surprised investors by plummeting recently.
What's going on? Stay tuned and I'll tell you.
MMA Offshore Ltd (ASX: MRM) – last traded at $0.85, down 67% for the year
MMA Offshore, formerly known as Mermaid Marine (hence the MRM ticker), is a services company that provides vessel contracts of various forms – Vessels, Supply Bases, and Slipway – to offshore oil and gas companies.
Considering MMA doesn't actually produce any oil or gas itself and instead relies on contracts from the producers for its income, its recent savage falls from prices of above $2 are understandable.
With capital expenditure being slashed in the industry and companies looking to renegotiate contracts, macroeconomic factors for MMA are not looking good.
I do like the company thanks to its recent expansion into south-east Asia, and there is a significant chance that oil markets will rebound later in the year or in 2016.
However the potential for lower profit margins and limited new contracts – and the risk of the oil market taking longer to recover – makes me believe that MMA is a 'Hold' at best for the moment.
Its share price could conceivably drop further if the oil price declines or if it becomes apparent that low prices are having a significant knock-on effect on MMA's contracts.
Japara Healthcare Ltd (ASX: JHC) – last traded at $1.89, down 23.8% for the year
Japara, a residential aged care provider in four Australian states, experienced a heavy sell-off in its shares after a payroll dispute in December cost the company around $5 million dollars.
Management did not inform the market as the dispute was not deemed to be material to the company's ongoing valuation (since the figure is such a small percentage of the company's assets and cash earnings).
Shareholders would prefer to have been told, and the subsequent sell-off has been sizeable, with the company declining from $2.60 in November to recent prices of $1.89.
Nevertheless the market for Japara's services is strong and growing rapidly, and one Foolish contributor believes that the company is the pick of the aged-care operators listed on the ASX thanks to high management ownership, strong financials and the absence of single controlling stakeholders.
I believe Japara has gone as low as it will go in the absence of any bad news, and could be set for a strong recovery in 2015.
Fortescue Metals Group Limited (ASX: FMG) – last traded at $2.05, down 60% for the year
Poor Fortescue Metals, on the nose again after what has already been a shocking year.
Unfortunately the company is at the mercy of the iron ore price, and is going to continue yo-yo-ing until its financials strengthen, ore prices firm up, or both.
Until then it's difficult to put any firm guidance on where the company is headed, particularly given the potential for surprise adverse events to smash Fortescue's share prices further.
The pick of today's article is definitely Japara, with its defensive business model, growing demand and strong financial position.
