Tuesday's Worst Stocks in the World

Bad days. We all have them; some of us deserve them. We'll get to the five stocks whose naughty ways drew investors' scorn on Tuesday in just a minute.

First, a clarification: Yes, yesterday was April Fool's Day -- or, as my kids say, "Motley Fool's Day!" -- and, yes, I was going with the spirit in naming UAL the "world's best stock." There is, indeed, promise in the business, but until no-brainer monetizing ideas like this one take root, it'll continue to linger among the worst, in my opinion.

Now, as for today's list:

Company

Closing Price

CAPS Rating (5 max)

% Change

52-Week Range

KKR Financial (NYSE:KFN)

$11.56

**

(8.69)

$9.39-$28.20

General Steel (NYSE:GSI)

$7.70

**

(7.56)

Not applicable

Alpha Natural Resources (NYSE:ANR)

$41.29

***

(4.95)

$15.50-$44.58

AAR (NYSE:AIR)

$26.00

*****

(4.66)

$22.97-$39.42

Yahoo! (NASDAQ:YHOO)

$28.50

**

(1.49)

$18.58-$34.08

Sources: The Wall Street Journal, Yahoo! Finance, Motley Fool CAPS.

Naughty?
Well, OK, we can't exactly call the stocks on this list naughty. There are days when five-star winners and newsletter recommendations appear here. Today is one of those days.

If you're an investor, you'll have plenty of bad days. The trick is to avoid dating -- or, worse, marrying -- your losers. That's why I listen when our 94,000-person-strong Motley Fool CAPS community of stock pickers speaks with a poor rating or a negative pitch. You should, too. Here are today's worst stocks in the world.

Worse
We begin with KKR Financial, a former guest in this column that's once again going back to the well.

After twice delaying payments to creditors, KKR has cleared some of its debts in exchange for collateral in the facilities covered by two "asset-backed conduits"-- code-speak for investments in real estate.

That's good news, right? Absolutely. A default would have been disaster. KKR still makes our list, though, because these negotiations don't go far enough. The firm plans to sell 20 million new shares in a public offering to boost its thinning liquidity.

Worser
Next up is Yahoo!, which apparently won't get a better bid from Microsoft (Nasdaq: MSFT  ) than the $44.6 billion Mr. Softy has already pledged.

According to sources quoted in The Wall Street Journal, Mr. Softy is standing firm because "there's no reason to bid against ourselves." Ouch.

But is this just posturing? A substantial number of those in our CAPS community who've rated Yahoo! say no. Here's how All-Star xthecritic put it at the end of February:

The Microsoft offer is now going to get caught up in a fight between the big Yahoo! shareholders and the board that just rejected it. As a result, nothing in terms of M&A is going to happen in the next 6 months. This should cause the stock price to cut a few dollars as [the] certainty of a takeout premium is reduced near term.

Agreed.

Worst
But our winner is AAR, which the Federal Aviation Administration says improperly maintained landing gear on several Boeing aircraft.

Turns out the investigation has been going on for years -- from 2001 to 2007. More than 300 parts were involved with the probe, Forbes reports. But it's the landing gear, specifically a part of that mechanism known as a truck beam, at issue.

Quoting from the FAA advisory:

Regulations require that type-certificated products conform to their type design. We encourage aircraft owners, operators, manufacturers, maintenance organizations, parts suppliers, and parts distributors to inspect their aircraft, aircraft records, and/or parts inventories for any Boeing 707, 747, 757, and 767 MLG truck beams approved for return to service by AAR Landing Gear Services between January 1, 2001, and November 26, 2007. If you find any MLG truck beams installed on any Boeing 707, 747, 757, and 767 aircraft, you should take appropriate action. If you find any MLG truck beams in existing inventory, we recommend quarantine to prevent installation until each MLG truck beams' eligibility for installation is determined. [Emphasis added.]

Sounds pretty serious to me. AAR executives disagree. Quoting from their response:

The FAA notice does not require taking any corrective action nor does it change the time a landing gear with painted interior surfaces can remain in service nor does it require the removal of any landing gear from service.

OK, but even if AAR has a case -- and it may very well, based on the facts as stated in its response -- isn't this final bit at odds with the spirit, if not the letter, of the FAA directive? And honestly: With maintenance issues front and center after FAA busts of American Airlines parent AMR (NYSE: AMR  ) and Southwest, is this really the time to be cavalier? I can't see how.

AAR and its nonapology apology ... 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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