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Why these 4 shares were smashed by the market today

Credit: Chatham House

Resource stocks were once again over-represented on the list of S&P/ASX 200 (INDEXASX: ^AXJO) (ASX: XJO) shares today after the value of iron ore, gold and oil fell overnight.

A couple of other familiar faces from outside the miners also reappeared, and here’s why:

Slater & Gordon Limited (ASX:SGH) lost a further 10.1% to $0.80 after management surprised shareholders yesterday by declaring that there was a significant risk the company would not meet its guidance for 2016 and that write-offs or impairments to the value of its UK interests might be forthcoming.

There’s really not a lot that can be said about the company at this point, other than that many investors have likely lost all faith in management. Fairfax media reported that a class action could be launched against the company. Investors are better off avoiding this one in my opinion.

Fortescue Metals Group Limited (ASX: FMG) fell 6.5% to $1.72 after Goldman Sachs slashed its forecasts for the value of the commodity over the next few years. Disturbingly, China’s steel demand is forecast to plummet over the next few decades as demand declines and recycling behaviour proliferates.

Commodity analysts are famous for identifying flaws in the henhouse gate long after the fox ate all the chickens, but broadly speaking I think Goldman has got the outlook for iron ore down pat. In a word: ‘Grim’.

Liquefied Natural Gas Ltd (ASX: LNG) fell 6.7% to $0.70 as the value of crude oil fell more than 1% overnight, following a 2.5% decline in the value of West Texas Intermediate (WTI) crude on Thursday.

A continued oil glut and slowing demand are predicted to hurt, with significant potential for oil prices to head lower in 2016. Much depends on factors outside of investors’ control, and buying into the sector right now is only for those with a strong tolerance for risk.

Finally, shares in Cabcharge Australia Limited (ASX: CAB) dropped 5.3% to $2.69 following a long year in which shares have lost 37% of their value. Although Cabcharge has long been a stalwart of the transport industry, improved payment systems for drivers as well as competition from external sources like Uber puts the company in a tough place.

It’s tough to own shares in an apparently declining industry, and its likely better for your wealth if you steer clear of Cabcharge.

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Motley Fool contributor Sean O'Neill has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. 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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