Monday'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 Monday:

Company

Closing Price

CAPS Rating
(5 max)

%
Change

52-Week
Range

Basin Water (NASDAQ:BWTR)

$5.14

*

(14.05%)

$4.10-$13.42

ScanSource (NASDAQ:SCSC)

$29.93

***

(13.22%)

$22.61-$39.50

Landry's Restaurants (NYSE:LNY)

$16.58

**

(7.43%)

$14.18-$32.30

Tesoro (NYSE:TSO)

$29.19

****

(6.59%)

$26.55-$65.98

Dillard's (NYSE:DDS)

$20.59

*

(6.54%)

$14.19-$40.56

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

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

But 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 95,000-person-strong Motley Fool CAPS community of stock pickers speaks with a poor rating or a negative pitch. You should too.

Thus, here is today's list of the worst stocks in the world.

Worse
We begin with Basin Water, a former guest in this column for its awful contracts, which suffered the further indignity of a downgrade from Citron Research on Monday. Analysts there didn't mince words:

Over the past year Basin Water seemed to have been operating their business out of a black box.  It was not until they posted their most recent annual report on March 17 that we now see a company that is destined to go to 0, just like the previous water company with the same management team -- Western Water.

Part of the problem, Citron says, is cash flow, or a lack thereof. Fair point:

Free Cash Flow*

2007

2006

2005

2004

Cash from operations

($13.3)

($12.4)

($6.4)

$1.1

Capital expenditures

($5.3)

($3.9)

($1.9)

($4.1)

Free Cash Flow

($18.6)

($16.3)

($8.3)

($3.0)

Sources: Capital IQ, a division of Standard & Poor's.
*Numbers in millions.

Worser
Next up is Tesoro, whose CEO, Bruce Smith, got a nice 3% salary raise after steering his company to lower profits on higher revenue.

My read of the proxy statement is a little different from a straight salary analysis. A footnote to the summary compensation table on Page 47 specifies that, of the more than $9 million in additional stock options benefit Smith realized in 2007, more than $8.1 million of that was related to "phantom option shares" granted to him 10 years ago.

So why add Tesoro to today's list? Smith also got a salary increase for underperforming peers such as ExxonMobil (NYSE: XOM  ) , which went swimming in a pool of cash last year.

Pay for performance should, in fact, mean pay for performance.

Worst
But our winner is Landry's, whose CEO, Tilman Fertitta, says the company is rapidly losing value.

Well, actually, he isn't saying that, but he may as well be. Fertitta offered to buy Landry's, of which he already owns 39%, for $23.50 a share in January. Yesterday he dropped his offer to $21 per share.

We can speculate what's at work here. Perhaps the credit crunch has made it harder to secure financing for the takeover bid, or perhaps he really does see less value in Landry's than he did in January.

Either way, one thing is clear: As with Build-A-Bear Workshop (NYSE: BBW  ) , Wendy's, and far too many others, no one else is interested in what Fertitta now hopes to get on the cheap.

Landry's and its suddenly reluctant suitor ... Monday'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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