This week has been another rough week for commodity stocks. Origin Energy Ltd's (ASX: ORG) surprise capital raising earlier this week crushed the share price of Santos Ltd (ASX: STO) which has now lost 70% of its value in this year alone.
There was plenty of pain elsewhere on the ASX as well, with a mining magnate, a healthcare stock, and an electronics retailer also feeling the pain:
Dick Smith Holdings Ltd (ASX: DSH) – last traded at $1.33, down 40% for the year
It was the recent full-year result that really sparked the collapse in Dick Smith's share price. Its full-year results were not particularly ugly although they did come in at the lower end of forecasts and a high number of short sellers really hammered the stock.
A number of other retailers like FlexiGroup Limited (ASX: FXL) and Thorn Group Ltd (ASX: TGA) have also been sold off recently as investors grow nervous over the state of the economy and the ability of these businesses to grow profits.
Dick Smith has forecast a modest increase in profit again this year, but even if it doesn't meet guidance the business is not priced for success and I doubt it will fall much further in the absence of any bad news.
BHP Billiton Limited (ASX: BHP) – last traded at $22.68, down 34% for the year
BHP has seen its shares pummelled as weak iron ore, coal, and oil prices hurt its earnings, and investors grow sceptical about whether its 'progressive' dividend policy is really a great idea.
Interestingly, despite the volatility and general bearish sentiment surrounding commodity prices, a number of analysts have price targets of around $30 on the stock. BHP also trades on a Price to Earnings (P/E) ratio of 14, which is in line with the ASX average, but substantially above other commodity producers like Rio Tinto Limited (ASX: RIO), which has a P/E of 8.
A number of economists have gone on the record recently as saying China's growth could be as low as 3% instead of the 7% reported. With this in mind I would not be comfortable buying BHP at today's prices, despite its cracking dividend yield.
Capitol Health Ltd (ASX: CAJ) – last traded at $0.53, down 18% for the year
The Productivity Commission reported earlier this year that: 'Governments and patients spend a considerable amount of money on health interventions that are irrelevant, duplicative or excessive (and) provide very low or no benefits.'
Capitol Health has been sold off heavily after the government commenced a Medical Benefits Review Scheme earlier this year, aiming to identify and trim back duplicative or unnecessary screenings.
While management forecast no changes expected this financial year, it is very possible that Capitol Health could suffer a hit to earnings in the future. With this in mind the stock could well go lower, but it is also starting to look attractive.
