Friday'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 Friday:

Company

Closing Price

CAPS Rating (5 Max)

% Change

52-Week Range

Glu Mobile (NASDAQ:GLUU)

$6.98

**

(32.95%)

$6.71-$14.80

Ditech Networks (NASDAQ:DITC)

$3.66

**

(21.96%)

$3.55-$8.99

Town Sports Int'l (NASDAQ:CLUB)

$11.25

**

(18.54%)

$10.05-$24.00

Warner Music Group (NYSE:WMG)

$9.08

*

(10.01%)

$8.79-$27.24

StarTek (NYSE:SRT)

$9.77

*

(8.35%)

$8.91-$15.46

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 that some may be worth shorting.

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

Worse
We begin with Warner Music Group, which said it would be the only major music label to snub Nokia (NYSE: NOK  ) in its effort to create a music store to compete with Apple's iTunes.

The reason? Piracy. Apparently, according to a Forbes article, some copyrighted material is appearing at Nokia's "Mosh" website, including some of J.K. Rowling's Harry Potter series.

So Warner won't play. Not yet, at least. But that is just plain stupid. Think of those who've seen their imprints appear on GooTube without permission -- Viacom, for example. No doubt the owners of Comedy Central deserve to get paid for the content they own, but is the viral spread of clips from The Colbert Report really bad for business? I doubt it, and I seriously doubt Warner will be anything but sorry for leaving investors out of this deal.

Worser
Next up is mobile games maker Glu Mobile, which forecast fourth-quarter revenue well below what the Street had expected.

At least one Fool saw the bad news coming. Here's a pitch from CAPS investor StKitt from two weeks ago: "Too many company press releases (two so far this week) equal idle hands. One begins to suspect pumping to dump."

Maybe that's too harsh. And, besides, analysts are often wrong when it comes to forecasts. Why is this miss so special? Good question. My response is that mobile gaming is an explosive market that's lifting the fortunes of many businesses, including the Finnish phone company from the last section and Stock Advisor pick Electronic Arts (Nasdaq: ERTS  ) . If Glu can't make its numbers during the good times, what happens when the market goes flat -- or, worse, south?

Worst
But our winner is outsourcer StarTek, which reported mediocre third-quarter earnings on Thursday night. You wouldn't know it from the press release, though. StarTek touted a 7.4% revenue gain over the prior quarter.

What nonsense. Remember, Fool, that sequential growth pales when compared with year-over-year growth. The former could easily signal that a big deal slipped a few months. The latter (usually) signals real business progress.

By highlighting its relatively meaningless sequential gains, StarTek's management appears as if they're trying to head-fake the reader into believing this stock story is better than it really is. How about we check the real numbers?

First, year-year-over-year revenue growth was up 2.1%, a far cry from the 7.4% management was touting.

Second, free cash flow is running negative, and that's without a single penny paid for the once-meaty, yet dangerous dividend that kept bulls in this stock.

Third and finally, net income would have also run negative if not for a one-time tax benefit. Yet CEO Larry Jones, who has what may be the most impressive sweetheart employment contract I've ever seen, told investors that StarTek has "turned the corner on growth and profitability."

StarTek and its let's-just-pretend-things-are-OK management team ... Friday'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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