Thursday'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 Thursday:

Company

Closing Price

CAPS Rating
(5 max)

% Change

52-Week Range

UTi Worldwide (NASDAQ:UTIW)

$18.52

***

(21.09%)

$18.40-$32.00

SAVVIS (NASDAQ:SVVS)

$28.23

**

(12.27%)

$27.68-$53.47

Cantel Medical (NYSE:CMN)

$16.11

****

(10.50%)

$12.85-$20.91

IndyMac Bancorp (NYSE:IMB)

$8.05

*

(8.00%)

$7.50-$46.60

Target (NYSE:TGT)

$55.57

****

(7.58%)

$50.25-$70.75

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 76,000-person-strong Motley Fool CAPS community of amateur and professional stock pickers.

On 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 think some may even be worth shorting.

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

Worse
We're leading off with lender IndyMac, right? This subprime lender is concerned about staying liquid, and it admitted in a public letter that it was thinking of cutting its dividend. Ouch.

But Target kicks off today's list because consumers aren't in a spending mood. Well, that's not exactly right. On a reported basis, same-store sales were up 10.8% in November.

Trouble is, most all of that appears to have been concentrated during Black Friday sales. Quoting CEO Bob Ulrich from Target's press release:

Our sales results largely met expectations through our two-day post-Thanksgiving event, but softness in the final week of November caused the month overall to fall short of our planned range. This late-month sales shortfall was concentrated in key seasonal categories including toys and holiday trim, but other home and apparel categories fell short of expectations as well. These sales trends would need to meaningfully improve in December in order to achieve fourth quarter EPS growth. (Emphasis added.)

Adjusting same-store sales to the same calendar period, there was only a 1.1% increase. Attention, Target shoppers? I said attention, Target shoppers! Hello? Is anyone there?

Worser
Next up is UTi Worldwide, which will be abandoned by Wal-Mart (NYSE: WMT  ) come March 1, 2008. That's when an outsourcing contract ends. UTi, you see, helps Wal-Mart with its supply chain.

"Helps" may be an understatement. According to a Keybanc Capital Markets analyst, Wal-Mart accounts for 10% of UTi's logistics business. Bulls will rightly point out that's still less than 5% of the company's overall revenue. Surely a 20% haircut in the price is an overreaction?

Perhaps. Yet I remain concerned by UTi's explanation. Executives say that Wal-Mart's decision wasn't based on service issues, but rather on a desire to bring supply chain services, such as distribution and fulfillment, in house.

Really? Supply-chain outsourcing is one of the most well-worn methods firms use for saving money. There are only two reasons to bring supply chain back in house:

  • 1. The outsourcing partner isn't doing a good job.
  • 2. It's cheaper, or faster, to do it in house.

Could it be that Wal-Mart figured out how to be better at supply chain management than the vendor it was paying? Sure sounds like it. Watch this business carefully, Fool.

Worst
But our winner is Akamai (Nasdaq: AKAM  ) peer SAVVIS, which had to cut guidance because of plans to open a new data center in London and expand existing data centers in Singapore and New York.

But you wouldn't know that from the headline from its press release:

SAVVIS Responds to Growing Global Demand For Data Center Hosting: New Data Center in London and Expanded Data Centers in Singapore and New York Metro Area Lead Global Expansion

Nice. Trouble is, you don't get to know the cost of "responding" to global demand till the end of the release:

SAVVIS anticipates that costs associated with running the new and expanded data centers ... will reduce Adjusted EBITDA for the fourth quarter by approximately $1 million, and costs incurred in 2008 will reduce Adjusted EBITDA for the year by approximately $10 million. As a result, the company is revising its outlook for fourth quarter 2007 Adjusted EBITDA to $38-40 million from $39-41 million previously announced, and revising 2008 Adjusted EBITDA to $200-210 million from $210-220 million previously announced. By 2010, the new ... data centers are expected to generate more than $80 million of revenue with an Adjusted EBITDA margin greater than 40%.

I've no doubt SAVVIS is optimistic about the prospects of its expanded network. They may well be proven right.

But as a Morgan Stanley analyst pointed out this morning, it's anyone's guess whether the largest data center users -- financiers, for example -- will be in a mood to spend cash on anything other than shoring up beleaguered balance sheets.

SAVVIS and its spin doctors ... 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 tomorrow for more stock horror stories.


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