The decline in the share price was measured as a percentage, as the ratio of the difference between the closing price of trading in 2021 and the closing price of trading in 2020 to the closing price in 2020 on the main trading platforms of issuers.
By the end of 2021, the S&P 500 stock index increased by 26.89%. The index is compiled according to the quotes of the most expensive American companies and reflects the average dynamics of dollar stocks. In contrast to the movement of the index, the average decline in the ten cheapest securities of the RBC Investments catalog was 72.2%. That is, the ten worst securities fell in price by an average of 4.2 times over the year.
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TAL Education securities, which led the top worst stocks, fell in price more than 18 times over the year — the fall in quotations of the Chinese educational platform was 94.5%. The shares of Fastly closing the list lost 59.4% in price, i.e. the securities of the cloud IT company fell in price by 2.5 times.
Among the cheapest papers are three representatives of biotech (TCR2, Esperion, Fibrogen), two manufacturers of electric vehicles (Lordstown Motors, Arrival). Clover Health, a health insurance company, Peloton, a manufacturer of exercise equipment with media components, and Vipshop, a Chinese online trading giant, are also among the worst securities.
No dividends were paid on any of our top shares during 2021, so investors did not even have a dividend incentive to buy these securities during the year.
There are two reasons for the fall in the quotes of anti-rating participants:
The victim of regulatory actions were Chinese papers - TAL Education and Vipshop. In March, the Chinese authorities strengthened the regulation of e-commerce companies. This led to a collapse in the quotations of Chinese e-commerce companies, among which Vipshop suffered the most. And in July, the Chinese authorities imposed restrictions on foreign private capital owned by educational companies. This had a disastrous effect on the quotes of TAL Education.
TCR2 and Fibrogen have failed in the development of their drugs.
Electric car manufacturer Lordstown Motors has lost a significant contract with the American postal service, and has not started to receive revenue. Quotes of the British manufacturer of electric buses Arrival, also not yet receiving revenue, fell after the announcement of the costs of the expected projects.
Fastly, Esperion, Clover Health and Peloton published reports that disappointed investors every time. At the same time, Clover Health and Esperion announced an additional issue of shares.
After a significant decline in quotations, the price of companies may become attractive for purchases. If you focus on the ratio of the stock price to financial results, then you can numerically determine how undervalued the stock is compared to similar securities. For these purposes, multipliers are used - special coefficients that compare the value of shares with various financial indicators.
However, in our case, you can see a curious picture. Due to the unprofitability, and in some cases, the company's activities, the values of the multipliers of most of these cheaper shares cannot be calculated correctly.
The only exceptions are Vipshop promotions. The company's P/E value is 7.2, and EV/EBITDA has a value of 4.1. This is less than the median values in the online trading sector of 18.4 and 18.3, respectively. That is, according to the multipliers, Vipshop papers are already much cheaper than competitors' papers.
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