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Why these three stocks have lost a third of their value in a month

In the past month, Reject Shop Ltd (ASX: TRS), Atlas Iron Limited (ASX: AGO) and Cabcharge Australia Limited (ASX: CAB) have lost more than 33% of their value.

Could there be more falls ahead, or are these stocks in the bargain bin, just waiting to be picked up by opportunistic investors?

The Reject Shop appears to be struggling with several major issues, including trying to sell products its customers don’t want or need. That resulted in sales sinking, and the company’s announcement that it expects to report a full-year net profit of $12.5 million – including a second-half loss of $5 million. The company also cut its dividend to zero – no doubt disappointing many investors.

At this stage, investors might want to avoid Reject Shop until the company can show it’s making some progress.

Atlas Iron is suffering from the falling iron ore price – which has dropped from above US$94 a tonne in March to around US$66 a tonne currently. As a junior miner with higher production costs, Atlas suffers the most out of Australia’s iron ore miners as prices fall. The bad news is that analysts and market commentators are expecting prices to continue falling. That is likely to see Atlas’ share price continue to sink.

Cabcharge’s share price fall is not really bad news, after the company sold its 49% share in the ComfortDelGro joint venture for $184 million and issued shareholders with a special fully franked dividend of 80 cents per share.

Still, the company’s main business model appears challenged particularly with the rise of cheaper ride-sharing services like Uber.

Foolish takeaway

I’d give all three companies a miss for now and can’t ever see myself investing in the latter two, given their structural issues. Investors have many better opportunities like these below.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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