Wednesday'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 Wednesday:

Company

Closing Price

CAPS Rating (out of 5)

% Change

52-Week Range

Basin Water (NASDAQ:BWTR)

$8.01

*

(22.23%)

$6.00-$13.42

Westwood One (NYSE:WON)

$2.29

**

(21.03%)

$2.06-$8.38

GateHouse Media (NYSE:GHS)

$10.28

**

(12.51%)

$8.95-$22.18

Talbots (NYSE:TLB)

$14.38

*

(12.05%)

$12.52-$26.90

Northstar Neuroscience (NASDAQ:NSTR)

$10.10

*

(11.79%)

$9.52-$14.81

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 74,000-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 some may be worth shorting.

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

Worse
We begin with broadcaster Westwood One, which has long been a favorite of mine when it comes to sports radio. But, as an investor, there's a lot to loathe:

Metrics

Trailing 12 Months

2006

2005

2004

Return on capital

5.7%

5.9%

7.9%

8.3%

Gross margin

24.3%

23.4%

32.1%

32.6%

Source: Capital IQ, a division of Standard & Poor's.

I see no news report explaining the decline in Westwood One's shares, but with those numbers, I don't need one. Do you?

Worser
Next up is newspaper publisher GateHouse Media, which fell to a new 52-week low after reporting third-quarter results below what the Street expected.

But that happens from time to time. Sometimes the white-shoe crowd gets it wrong. And it's not like publishing peers New York Times (NYSE: NYT  ) and Gannett (NYSE: GCI  ) are doing much better. What's so special about this miss? Nothing, actually. The trouble is with GateHouse's cash flow statement.

At first, it looks great. Free cash flow nearly quadrupled to $35.1 million through the first nine months of 2007. Excellent, right? Sure, if the publisher hadn't paid $39.6 million in dividends over the same period.

I'd love to believe that GateHouse can afford to sustain its meaty 13.6% dividend yield. Sadly, the numbers tell a very different story.

Worst
But our winner is water treatment specialist Basin Water, which reported a twelvefold increase in its per-share loss for the third quarter. Management's explanation for the shortfall says it all. Here it is, verbatim:

While operating contract revenues increased due to newer systems coming online, many of these systems were under older, legacy contracts with inadequate contract terms and conditions, and priced many years before the Company's recently installed business systems and practices could be applied. As these legacy projects began operating [emphasis added], especially during the hotter summer months, it became apparent to the Company [emphasis added] that most of these projects would be operating at a loss for some period of time. As a consequence, during the third quarter, the Company recorded a $4.7 million charge to cost of revenues to reserve for future projected losses. This reserve was due primarily to poorly priced contracts, increasing waste disposal and salt purchase costs and the inability to contractually pass increased costs on to our clients. [Emphasis added.]

Translation: We finally realized how bad our business was when we looked at the contracts.

Basin Water and its attention-deficit-disorder-afflicted management team ... Wednesday'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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