As the S&P ended up little changed, low earnings, Libor fixing, Spanish bonds and French legislation brought these five stocks to sell off this month.
Despite all the volatility this month, all the shocks and earnings results, the S&P 500 ended up little changed in July. In Europe, as concerns surrounding the sovereign debt crisis continued to rage on, benchmark bond yields in Spain and Italy reached euro-era highs on fears the worst is yet to come. Elsewhere, concerns grew surrounding the Libor-fixing scandal and the involvement of some of the continent's largest financial institutions.
It is in this environment then that we move to these five companies. These firms saw share prices collapsing during the month, and may yet be set offer potential selling or buying opportunities.
Alcatel-Lucent (-37%)
The French major Acatel-Lucent (NYSE: ALU.US) has seen a busy month of news in July, most recently reporting it would be cutting 5,000 jobs in order to reduce costs after reporting a loss in the latest quarter. Earlier in the month, the company was hit after France Telecom said it was Alcatel's equipment that failed and caused the country's phone networks to be out for a weekend.
Alcatel abandoned its full-year profit target after reporting a net loss of €254 million in the latest quarter, while net cash shrank by €517 million to €236 million. The company hopes the job cuts announced towards the end of the month should save them in the region of €750 million, but to what extent this will help the firm turn around its ailing finances is not yet clear.
Telecom Italia (-17%)
Telecom Italia (NYSE: TI.US), Italy's largest phone operator, was hit by a report mid-month saying the country's limits on its phone networks may be in violation of EU laws. Specifically, there is a law in place in Italy that separates the provision of access to the company's wholesale network from the activation and maintenance of lines; something that has generally, if unintentionally, benefited TI.
Meanwhile, broader concerns surrounding Italy's sovereign debt had a knock-on impact on TI's corporate bonds, which saw a sharp drop-off in demand in the last weeks of July. The company suffered further after its CEO said that a ban imposed in Brazil, suspending sales from the company because of bad service, has cost it as much as $2.5 billion in market value.
Deutsche Bank (-16%)
Deutsche Bank (NYSE: DB.US) has become embroiled in the Libor-fixing allegations during July, hit early in the month by a report from Morgan Stanley saying that it is set to face some of the highest litigation costs of the 16 banks facing potential fines, which could reach as high as €1.6 billion for DB.
The bank set aside $1 billion to cover its costs in legal fees and fines towards the end of the month, and lost an additional 3% off its share price after it reported weaker-than-expected results; net income dropping from €1.2 billion to €700 million year on year.
Veolia Environnement (-11%)
The French utility supplier Veolia Environnement (NYSE: VE.US) has seen more than 10% of its share price shed in July, in large part on the back of concerns early in the month following a speech by Prime Minister Jean-Marc Ayrault, saying that the government will be implementing a massive plan of energy savings and will be setting up "progressive" prices for gas, power and water.
Towards the end of July Veolia has been offered some respite, with Highstar Capital agreeing to buy its US waste management business for $1.9 billion, and in the last few days reporting it has agreed to sell its waste services unit in Estonia and Lithuania to Alexela Energia.
Banco Bilbao Vizcaya Argentaria (-11%)
Banco Bilbao Vizcaya Argentaria (NYSE: BBVA.US) managed to par some of the month's losses during the last weeks of July thanks to approval of the EU's planned €100 billion bailout for the Spanish banking industry but it did, however, start on a decidedly more negative note. A large share issuance at the beginning of the month pushed down stock prices on dilution concerns, which took a further hit after a downgrade in the outlook of its shares from HSBC the following day.
But broader concerns surrounding the Spanish debt crisis have been the name of the game for the bank. With benchmark 10-year bond yields reaching the highest levels since the year 2000, well into the territory that had other nations like Greece seeking EU help, the outlook for BBVA is very much dependent on what happens to Spain as a whole.
Buffett is still buying
This month's European trading has provided its fair share of ADR losers -- and perhaps some European buying opportunities. Indeed, legendary investor Warren Buffett has recently spent more than $1 billion buying a prominent European stock that has slumped this year.
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> Karl does not own any share mentioned in this article.
