Monday's Worst Stocks in the World

Bad days. We all have them; some of us deserve them.

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

Company

Closing Price

CAPS Rating (5 max)

% Change

52-Week Range

Progressive Gaming (NASDAQ:PGIC)

$3.93

*

(18.63%)

$3.55-$9.98

Office Depot (NYSE:ODP)

$17.43

**

(14.10%)

$16.51-$42.61

Champion Enterprises (NYSE:CHB)

$11.52

**

(11.66%)

$7.18-$14.59

Ninetowns Internet (NASDAQ:NINE)

$5.28

**

(9.43%)

$2.64-$7.20

Fresh Del Monte Produce (NYSE:FDP)

$34.67

**

(7.67%)

$14.40-$37.93

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 gets much love from our 72,000-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 Roger Ebert. They don't believe any of these stocks are worth owning. They even think some may be worth shorting.

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

Worse
We begin with casino-games manufacturer Progressive Gaming, which analysts at ThinkEquity Partners snubbed. The reason? Progressive will post a $20 million bond to appeal a $39 million court judgment for violating trade laws in 2002.

Progressive will also be required to grant a subordinated interest in its assets for any amount it can't pay in cash, the Associated Press reported.

Yeowch! Yet as bad as that is, I can't help wondering why it took ThinkEquity so long to downgrade this stock. Consider the numbers:

Metrics

TTM*

2006

2005

2004

Return on capital

(7.9%)

(11.8%)

0.3%

8.4%

Return on equity

(40.4%)

(38.9%)

(10.4%)

2.9%

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

You'd have to dump cash into a shredder to destroy value any faster.

Worser
Next up is office-supply retailer Office Depot, which delayed its third-quarter earnings report because of accounting issues.

No, this isn't your run-of-the-mill "oops, we mispriced options grants" story. Office Depot's managers may have goofed in recognizing funds from vendors -- rebates and advertising allowances, for example.

The fear appears to be that, in improperly recognizing these credits, Office Depot may have unfairly boosted revenue or operating income. But that's for the company's audit committee to decide. For now, Office Depot is skipping earnings season to allow time for an investigation.

Don't hold your breath waiting for the results.

Worst
But our winner is homebuilder Champion Enterprises, which on Monday filed a prospectus for $130 million in senior debt.

It looks like a winning deal at first -- Champion has $242 million in debt due by 2012. The offering would allow for roughly $100 million of that to be paid off, while leaving Champion with $138.9 million in cash in its coffers.

Sweet. Or is it? This morning, Champion increased the offering to $160 million and priced the terms. Quoting the press release: "The notes will bear interest at a rate of 2.75% per year, payable on May 1 and Nov. 1, beginning on May 1, 2008. The notes will mature on Nov. 1, 2037." [Emphasis added.]

Translation: This isn't really debt; it's a stock offering in disguise. Only terminally stupid investors would willingly sign up for a 2.75% annual return when the 91-day U.S. Treasury bill offers 3.90% as of this writing.

That's why they won't. Instead, investors who buy Champion's convertible debt will be buying with not just the hope, but also the expectation of converting their stake into stock after at least a couple of years of payments.

Champion Enterprises and its if-we-say-it's-debt-then-maybe-they-won't-think-we're-diluting-them management team ... Monday'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 tomorrow for more stock horror stories.


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