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

Ambac Financial (NYSE:ABK)

$3.46

*

(42.62%)

$3.08-$96.10

Delphi Financial (NYSE:DFG)

$22.45

**

(23.46%)

$22.26-$47.79

Cree (NASDAQ:CREE)

$26.42

****

(14.94%)

$18.35-$35.50

Carter's (NYSE:CRI)

$14.01

****

(10.82%)

$13.12-$29.00

US Airways (NYSE:LCC)

$6.25

*

(8.63%)

$6.10-$44.31

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 98,000-person-strong Motley Fool CAPS community of stock pickers speaks with a poor rating or a negative pitch. You should, too.

Thus, here is the latest list of the worst stocks in the world.

Worse
We begin with Cree, which suffered the ire of investors after reporting that its third-quarter profit fell 73%. Worse, management says that fourth-quarter revenue will fall short of Street estimates.

Yet Cree, with product revenue up nearly 40% year over year, is a fast mover. And its LED lighting technology holds promise.

So why does the stock make our list? Inventory. Though it's not nearly as bad as Crocs (Nasdaq: CROX  ) , whose stockpiles have grown twice as fast as sales, Cree's inventory rose 66% in the third quarter, or 22 percentage points faster than revenue.

Not a good sign.

Worser
Next up is insurer Delphi Financial, which suffered a 46% decline in profits, thanks to big investment losses.

And I do mean big. Net investment income was down to $32.3 million from $71.3 million in last year's first quarter. CEO Robert Rosenkranz was sanguine about the results. Quoting from a company statement:

The gratifying performance of our insurance operations was marred by obviously disappointing investment results. In part this was due to our conscious decision to raise unusually high levels of cash -- some $437 million at quarter end -- in anticipation of some excellent investment opportunities which we are currently taking advantage of. But the very environment that creates those opportunities was the most punishing one in recent memory for virtually all types of financial assets and investment strategies. While substantially all of Delphi's assets are marked to market on the balance sheet, in some cases these marks flow through the income statement as well. These assets included, among others, our investments in limited partnerships and in limited liability companies and our trading account portfolio. In the first quarter, returns on these assets were down as much as they are usually up, and the negative mark to market was the largest contributor to our investment income shortfall. [Emphasis added.]

Seems reasonable enough. And, on balance, I agree that it's good strategy to invest when others flee for the exits.

Nevertheless, we needn't pretend that Delphi's hedge fund portfolio will somehow manage a 180-degree turnaround in the months to come. Without that, Delphi's lagging results are likely to continue. Invest accordingly.

Worst
But our winner is US Airways, which on Wednesday copped to needed repairs on the wings of some of its Boeing 757 aircraft. (One jet even lost a wing panel during a flight from Orlando, Fla. to Philadelphia, Penn.)

Fortunately, the problems now appear to be fixed. Yet, with maintenance issues arising at both Southwest and AMR (NYSE: AMR  ) over the past month, it's a good bet that all carriers are going to see increased scrutiny from the Federal Aviation Administration.

You know what that means: a long, hot summer filled with delays, disgruntled customers, and disappearing profits.

US Airways and, well, all of its airline peers ... Wednesday's worst stocks 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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