Thursday's Worst Stocks in the World

Bad days. We all have them. Some of us deserve them. Sometimes, stocks deserve them.

Here are five stocks whose naughty ways drew investors' scorn on Thursday:

Company

Closing Price

CAPS Rating
(out of 5)

%
Change

52-Week
Range

IMS Health (NYSE:RX)

$23.12

**

(21.79%)

$26.26-$33.12

NovaStar Financial (NYSE:NFI)

$5.95

*

(19.38%)

$4.17-$129.00

MoneyGram International (NYSE:MGI)

$19.98

**

(11.44%)

$19.76-$35.18

Avici Systems (NASDAQ:AVCI)

$9.18

**

(18.04%)

$6.47-$13.96

Neurochem (NASDAQ:NRMX)

$3.62

*

(17.73%)

$2.12-$26.51

Sources: The Wall Street Journal, Yahoo! Finance, Motley Fool CAPS.

Naughty?
Well, OK, we can't exactly call these stocks naughty. But none of them get much love from our 70,000-person-strong Motley Fool CAPS community of amateur and professional stock pickers.

To the contrary -- when it comes to these stocks, CAPS investors have gone thumbs-down more often than film critic Roger Ebert. They don't believe any of these stocks are worth owning, and they even think that some may be worth shorting.

Which of today's candidates is worst? Read on, dear Fool.

Worse 
We begin with NovaStar Financial, which said the New York Stock Exchange notified it of a pending delisting. Apparently, NovaStar no longer meets the minimum listing requirements.

At issue are NovaStar's size and status. Under NYSE rules, NovaStar would need to be worth at least $100 million and trade for not less than $4 a share to quality for its NYSEArca subsidiary. By contrast, firms aiming for the Big Board must produce at least $75 million in annual revenue and be worth no less than $750 million in market cap. NovaStar is no longer a REIT, and as of this writing, its market cap is just $56.3 million.

Fare thee well, NovaStar. See you in the Pink Sheets.

Worser
Next up is MoneyGram International, which lowered its fiscal 2007 earnings forecast from $1.50-$1.54 a share to $1.49-$1.55 a share. Big deal, right?

Right. What bothers me is the follow-up. MoneyGram also said it has hired JPMorgan Chase (NYSE: JPM  ) to help it sell its payments group, which sells money orders.

You know how awful that business is. Just ask yourself the last time you used a money order instead of a check. Precisely. That's why the group's revenue is down from $9.6 million in the first quarter to $6.6 million in the third.

And that situation, in turn, has contributed to cash-flow woes at MoneyGram:

Metrics

TTM*

2006

2005

2004

Free cash flow

($399.7)

($451.0)

$54.6

$776.2

Numbers in millions.
Source: Capital IQ, a division of Standard & Poor's.
*Trailing 12 months.

At least management can keep warm while it waits for a buyer. The cash-fueled campfire burning outside its HQ shows no signs of weakening.

Worst
But our winner is IMS Health, which has long operated in legal limbo and could now be suffering the aftereffects. CAPS investor AtticusFynch explains:

IMS collects prescription data from pharmacies. It pulls doctor license numbers from the prescriptions, then puts together a dossier of what each doctor prescribes. It then sells the data to big pharma companies so they can target their marketing efforts to convert doctors from competing products. A shady practice at best, and lawmakers are catching on. New Hampshire just outlawed the practice. [Editor's note: That law was recently ruled unconstitutional, and the decision is on appeal.]

Other states are considering it. The pharma lobby is fighting it, of course, and their clout is not to be underestimated, but the AMA is a strong lobby as well, and they object to the practice. I think the days for this ethical [gray] area of a business model are numbered.

That was 13 months ago. On Wednesday evening, IMS announced a small decline in non-GAAP net income and a noticeable decline in operating margin, from 23.9% a year ago to 21.7% in the most recent quarter.

Could that indicate a move away from data management and toward consulting? Possibly. Direct operating profit from lower-margin consulting services improved by 41% year over year, versus just 14% for IMS's core information and analytics business.

Meanwhile, in a statement, CEO David Carlucci praised the consulting business:

In an increasingly demanding health-care environment, momentum in our consulting business was very strong as clients continue to recognize the value of our strategic recommendations and industry perspective. Our clients' challenges present considerable opportunities for us. We're focused on these opportunities and remain well positioned to help drive their continued success. [Emphasis added.]

Translation: "We're no longer sure we can get away with selling data, so from now on, please call us consultants." Riiiiiiight.

IMS Health ... Thursday's worst stock in the CAPS world.

Do you agree? Disagree? Let us know what you think by signing up for CAPS today. It's 100% free to participate.

See you back here next week for more stock horror stories.


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