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
(5 max)

%
Change

52-Week
Range

CSK Auto (NYSE:CAO)

$6.12

*

(33.41%)

$5.99-$19.14

Network Equipment (NYSE:NWK)

$10.69

***

(18.02%)

$5.13-$15.75

Office Depot (NYSE:ODP)

$15.04

**

(11.48%)

$14.68-$41.06

Hoku Scientific (NASDAQ:HOKU)

$11.49

*

(9.74%)

$2.52-$14.55

Continental Airlines (NYSE:CAL)

$24.23

*

(9.52%)

$23.63-$52.40

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 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 that some may be worth shorting.

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

Worse
We begin with Office Depot, which blamed the housing bust for weak guidance. Quoting from its press release:

Office Depot projects continued erosion of sales and earnings in the fourth quarter of 2007. As previously reported, the Company's results for the third quarter of 2007 were negatively impacted by difficult housing-related economic conditions in certain of its key markets, particularly Florida and California, which accounted for 28 percent of North American sales in that period. [Emphasis added.]

Really? Harry and Sally are crossing pens and boxed paper off their shopping list because no refi is in the offing? Get real.

Foolish observation: "The housing bust made me do it" is the new "the dog ate my homework."

Worser
Next up is CSK Auto, which revealed in this 8-K that it would seek to amend its credit agreements. Apparently, the firm is perilously close to a default. Quoting:

Although Auto was in compliance with the fixed charge coverage and leverage ratio covenants in the Term Loan Facility at the end of the third quarter of fiscal 2007, based on recent operating results and sales trends, the Company anticipates that Auto will not be in compliance with such covenants commencing at the end of the fourth quarter of fiscal 2007. [Emphasis added.]

Oh, goody.

Worst
But our winner is telecom supplier Network Equipment, which announced that it would go to the capital markets for $85 million more in funding, even though it has a perfectly respectable balance sheet.

That won't last, though. Network Equipment could add as much as $105 million in convertible debt to the $24 million it already carries. Cash would still outweigh debt -- by at least $70 million, by my math -- yet that, too, is unlikely to last. Management appears determined to spend.

Quoting from the company's press release: "The company expects to use the net proceeds for working capital and general corporate purposes, which may include capital expenditures and potential acquisitions. [Emphasis added.]"

Look, I'm no Scrooge, but I believe that management has to earn the right to go to the well and dilute shareholders, preferably by amassing a history of excess returns on capital. But, on that basis, Network Equipment's managers fail; they've been destroying capital since 2000.

Network Equipment and its needlessly dilutive 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.

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

Jingle bells
For every post you make to CAPS or any Foolish discussion board in the month of December, The Motley Fool will donate $0.02 to charity. So give us your 2 cents and we'll pay it forward!

To learn more about the My 2 Cents campaign and how you can help us raise money for five very Foolish charities, check out our Foolanthropy page.


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