The Worst Stock for 2008 Is ...

As an optimist, I have a tough time scouring the market for companies that probably won't prosper. There are exceptions for everything, of course, and not every stock is a great investment. To weed out the duds, we compiled a list of 17 stocks that might ultimately be 2008's worst performer.

From XM Satellite Radio (Nasdaq: XMSR  ) and Research In Motion (Nasdaq: RIMM  ) to Washington Mutual (NYSE: WM  ) and Starbucks (Nasdaq: SBUX  ) , we asked our Motley Fool CAPS community to voice their opinions for this year's worst stock. Now the votes are in, and the community has spoken.

No rebuilding expected this year in housing
In third place, CAPS players picked residential homebuilder Beazer Homes (NYSE: BZH  ) . Intuitively, we can't run a worst stock contest without mentioning a homebuilder -- or a bank like Washington Mutual, for that matter -- after the turmoil both sectors experienced this past year.

Fellow Fool Anand Chokkavelu argued quite persuasively that Beazer's future looks bleak. A high level of debt, coupled with negative free cash flow, suggests that this company is in for a rough time during 2008. Worse yet, Beazer is cutting its workforce and suspending its dividend payouts. Add in an ongoing SEC investigation, and it's no wonder that Beazer rounded out our top three worst stocks for 2008.

Driving into second place
Second place seems fitting for this company. This is its second year of being nominated as a worst stock, and it's projected to become No. 2 in its industry. I'm talking about car manufacturer General Motors (NYSE: GM  ) .

With increased pressure from foreign competitors, high fixed costs, and heavy industry regulation, this company seems likely to struggle in a weakening economic environment. Fool contributor Joe Magyer perceives the company as highly leveraged, especially in the shadow of a rough economy. GM is a consumer-based company, and the word "recession" strikes fear in the hearts of investors and consumers alike.

A solar-powered drumroll, please
Alternative energy firm First Solar (Nasdaq: FSLR  ) is bringing home the gold (or coal, depending on how you look at it) as the Fool's worst stock for 2008. When the nomination article was published, the company was trading at nearly 50 times sales, and nearly 200 times EBITDA, leading Fool analyst Jim Gillies to suspect that company is just one bad quarter away from disappointing times ahead.

Aside from his concerns over its value, Jim also wasn't sold on the outlook for its entire industry. He noted that most initiatives for energy-efficient alternatives are based more on social appeals than economic arguments. Presumably, these social appeals won't brighten this stock through 2008.

On a positive note ...
It's not all doom and gloom here at The Motley Fool. We also nominated a plethora of companies with far sunnier outlooks for our "Best Stocks for 2008" series. Armed with these two lists, you've now got a leg up on making Foolish investing choices for the year ahead.


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