Tuesday'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 Tuesday:

Company

Closing Price

CAPS Rating
(5 max)

%
Change

52-Week Range

NCI Building Systems (NYSE:NCS)

$28.12

**

(21.41)

$28.09-$60.61

Medarex (NASDAQ:MEDX)

$10.56

**

(20.90)

$10.44-$18.23

WCI Communities (NYSE:WCI)

$3.83

*

(20.37)

$3.00-$24.20

Cowen Group (NASDAQ:COWN)

$9.77

*

(13.16)

$8.81-$21.82

Washington Mutual (NYSE:WM)

$17.42

**

(12.37)

$16.75-$46.38

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 77,000-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 think some may be worth shorting.

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

Worse
We begin with Cowen & Co. parent Cowen Group, which on Monday after market close announced that it was increasing its ratio of compensation to revenue, yet facing operating losses. Here are the relevant excerpts, beginning with a statement from CEO Kim Fennebresque: "The decision to increase the firm's compensation to 65% for 2007 was very difficult because of the obvious consequences for our bottom line and to our shareholders." [Emphasis added.]

What consequences? Next paragraph, please: "Based on current internal estimates, including the increased compensation ratio, Cowen management estimates a full year 2007 net operating loss of between $6.0 million and $8.3 million." [Emphasis added.]

Capital IQ reports that Cowen had booked a $2.8 million operating loss through the first nine months of 2007. Thanks in part to the raise, that total will now at least double and could triple. Nice going, guys.

Worser
Next up is Washington Mutual, which, like peers Wells Fargo (NYSE: WFC  ) and Citigroup (NYSE: C  ) , is facing steep writedowns in its ailing mortgage business.

Trouble is, the cure seems no better than the disease. WaMu plans to go to the capital markets for $2.5 billion via preferred stock that would heavily dilute the interests of existing investors. Cost cuts, meanwhile, are expected to put at least 3,000 employees out of work.

Bad? Yes. But not enough to warrant a spot on today's list. For that, I refer you to the third paragraph of WaMu's press release. Quoting: "In addition, the company said its Board of Directors intends to reduce the quarterly dividend rate to $0.15 per share from its most recent quarterly dividend rate of $0.56 per share."

Ouch. Just as a rising dividend signals business strength, a cut signals weakness. A 73% cut, as we have here, signals ... Well, honestly, I don't know. Impending doom, perhaps? Unlikely, but whatever it is, I suppose to investors it feels like the atomic wedgie you got in seventh-grade gym class. Ah, memories.

Worst
But our winner, once again, is builder WCI Communities, which is seeking grace from its creditors in order to keep the doors open. Quoting from its press release: "WCI Communities ... today reported that the limited waiver of performance that was previously granted by its banks has now been extended to January 7, 2008. ... During the extended waiver timeframe, we expect to finalize discussions regarding the anticipated longer-term amendment that would provide financial flexibility." [Emphasis added.]

Now, here's why you should cringe: "This amendment will be expensive and there can be no assurance that we will [be] able to comply with the amended covenants and other requirements. If WCI is unable to obtain the amendment or comply with its terms, the lenders would have the right to exercise remedies specified in the loan agreements, including foreclosing on certain collateral and accelerating the maturity of the loans, which could result in the acceleration of substantially all of our other outstanding indebtedness." [Emphasis added.]

Is it me, or does it sound as though WCI is no more than a missed payment or two away from bankruptcy? Maybe that's not how it looked last month, when director Philip Handy was buying shares. But a lot can change in three or four weeks, and yesterday, board member Hilliard Eure, a former accountant, liquidated his entire direct stake in WCI.

Nuff said.

The credit beggars at WCI ... Tuesday'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.

I'll be back tomorrow with more stock horror stories.


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