Picking through the rubble of this year’s hardest-hit stocks

As each year draws to a close, I like to sift through the debris of the year’s worst-performing stocks.

Usually I can find one or two that strike me as bargains.

This year, among all U.S. stocks with a market value of $5 billion or more, the worst performers are:

Icahn Enterprises LP (IEP), down 62.9%.

Enphase Energy Inc. (ENPH), down 53.2%.

Moderna Inc. (MRNA), down 52.1%

FMC Corp. (FMC), down 51.4%.

Ubiquiti Inc. (UI), down 49.5%. I recommend two of these five big losers: Moderna and FMC.

Moderna

Moderna burst from obscurity to instant fame with its highly successful COVID-19 vaccine. Well over 200 million doses of the vaccine have been administered in the United States since the pandemic began in 2020.

Moderna’s revenue was $2.7 billion in the 12 months through December, but COVID vaccinations have been declining. In the September quarter, Modern’s revenue was $551 million, down 13% from a year earlier.

The company believes that its messenger-RNA technique can be applied to other diseases besides COVID-19, and that seems highly plausible to me. But this is a risky investment, given that Moderna has swung from a $20-a-share profit in fiscal 2022 to an estimated $10.72-a-share loss in fiscal 2023.

FMC

FMC Corp., with headquarters in Philadelphia, makes chemicals to protect crops against insects, weeds and fungus. It also makes fertilizer.

FMC’s stock price is slightly below where it was a decade ago. This year, sales to Brazil and Argentina fell hard. Nonetheless, the company has shown a profit in each of the past 15 years.

It has a respectable return on equity, nearly 15%. And it sells at a reasonable valuation — 15 times recent earnings and only 12 times the earnings that analysts project for 2024. Over the past decade, the average multiple was 22. I think the stock is undervalued.

Enphase Energy

After its big drop this year, Enphase Energy sells for about $124 a share, down from a high of $336 last year. Based in Fremont, California, the company makes microinverters, which are a key element of many solar-energy panels.

Microinverters convert direct current to alternating current, which is used in most homes and commercial buildings. Enphase also makes batteries to store solar energy.

The company has grown its revenue at a 37% annual clip the past five years. Growth has continued this year but at a slower pace, which Enphase blamed on sluggish economies in Europe plus some weakness in the California market.

As a cheapskate value investor, I find Enphase too expensive at 31 times recent earnings. But I think that investors who are more willing to pay up for growth than I am should watch this stock closely. I view Enphase as a high-quality company.

Ubiquiti

Ubiquiti Inc., based in New York City, provides computer networking equipment and services, mostly to small and medium-sized businesses. Since 2020, the company’s liabilities have exceeded its assets. That’s a situation that I prefer to avoid.

Icahn Enterprises

Financier Carl Icahn is the board chairman and major stockholder of this limited partnership, which invests in a wide variety of companies, and often pushes for structural change at companies it views as underperformers.

Icahn Enterprises appears to be headed for its fifth unprofitable year in a row (based on reported earnings per share, fully diluted, and including nonrecurring items). So I’m not tempted here, despite a sky-high dividend (part of which is return of investors’ capital).

The record

I’ve written 12 previous columns on the year’s biggest losers, and recommended a total of 24 stocks (from one to three each year). Those stocks have averaged a 25.1% return in the next year, which is nicely above the 15.8% average for the Standard & Poor’s 500 Total Return Index over the same periods.

So far, so good, but the results are mixed. Only six of my 12 sets of recommendations in this series have been profitable. And only four have beaten the index. My results were helped by profits exceeding 100% on the recommendations from 2012, 2015, 2016 and 2020.

Bear in mind that my column results are hypothetical and shouldn’t be confused with results I obtain for clients. Also, past performance doesn’t predict the future.

A year ago, I recommended two stocks from among the year’s biggest disasters. Twilio Inc. (TWLO), a business-software company, did well, returning

64%. Lucid Group Inc. (LCID), an electric car maker, bombed, with a 34% loss.

Disclosure: I own Moderna for a few of my clients. A colleague at my firm owns FMC for his clients.

John Dorfman is chairman of Dorfman Value Investments

LLC in Boston, and a syndicated columnist. His firm or clients may own or trade securities discussed in this column. He can be reached at jdorfman@dorfmanvalue.com.