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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:


Closing Price

CAPS Rating

(5 max)





Alesco Financial (NYSE:AFN)





Six Flags (NYSE:SIX)





Build-A-Bear Workshop (NYSE:BBW)





ImClone Systems (NASDAQ:IMCL)





Pacific Sunwear (NASDAQ:PSUN)





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

Well, OK, we can't exactly call these stocks naughty. There are days when five-star winners and newsletter recommendations appear here. Unfortunately, today is 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 100,000-person-strong Motley Fool CAPS community of stock pickers speaks with a poor rating or a negative pitch.

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

We begin with Six Flags, which last week missed the mark in reporting a $1.62-per-share loss on a 35% revenue increase in its most recent quarter. CEO Mark Shapiro, who has been a semi-regular buyer of Six Flags shares, called the results an "improvement."

While Shapiro is technically correct -- a $1.62-per-share loss is certainly better than last year's $1.86-a-share sinkhole -- Foolish colleague Anders Bylund sees little to cheer about. Quoting:

You might blame a tough economy, perhaps. But consider that Walt Disney (NYSE: DIS  ) operates under the same conditions and turned 5% attendance and spending increases into $339 million in the park segment's operating income -- 33.5% better, year over year. So that excuse won't fly with me.

Nor with me. Revenue growth would matter a whole lot more if gross margin weren't contracting.

Next up is Build-A-Bear Workshop, which analysts at Credit Suisse downgraded yesterday over fears that the retailer would continue to suffer from a weakening economy.

To be fair, Build-A-Bear continues to produce excess cash flow. Its balance sheet is debt-free. Trouble is, a not-so-cuddly history of margin-killing price cuts could change all that in a hurry:






Gross margin





Source: Capital IQ, a division of Standard & Poor's.

But our winner is Alesco Financial, which said it isn't likely to receive mortgage trust payments that had been due from IndyMac Bancorp (NYSE: IMB  ) .

At issue are eight collateralized debt obligations or CDOs that were to provide $2.1 million in quarterly interest payments. Alesco's share of that equals $1.5 million, or $0.02 a share, per quarter.

Interestingly, a few Fools foresaw the fallout. Here's how CAPS investor NeroSagetrade put it in December. Quoting:

Alesco is a financial disaster and we may just be seeing the tip of that iceberg here. [Alesco] was forced to absorb over 500 million in writedowns last quarter and yet they defiantly have decided to pay out their regular quarterly dividend ... Business is very weak and their mortgage-backed assets are declining by the day. There is no way this company can maintain their hefty dividend, and trust me, that ... dividend is the only thing keeping investors in this stock. I highly doubt they will survive under their current structure. [Emphasis added.]

Today that dividend is yielding a hefty 25%. And it could be at risk. Quoting from the press release:

At April 30, 2008, AFN had available unrestricted cash of $120 million, including cash generated by previously disclosed gains on credit default swaps. This cash would be sufficient to allow AFN to maintain its first quarter 2008 dividend rate for the remainder of 2008... The payment of future dividends is, however, subject to the review and approval of AFN's board of directors, and there can be no assurance that AFN's board will determine to maintain the first quarter dividend rate... AFN is reviewing a number of strategies for the company, including whether to continue to maintain its REIT qualification. Any change in strategy could impact the level of future dividend payments. [Emphasis added.]

Alesco Financial and a very likely credit-crunched dividend yield ... 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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Related Tickers

10/24/2016 4:02 PM
BBW $10.70 Down -0.15 -1.38%
Build-A-Bear Works… CAPS Rating: *
DIS $93.37 Up +0.34 +0.37%
Walt Disney CAPS Rating: *****
IMCL $69.99 Down +0.00 +0.00%
ImClone Systems CAPS Rating: **
PSUNQ $0.00 Down +0.00 +0.00%
Pacific Sunwear CAPS Rating: *
SIX $51.75 Down -0.07 -0.14%
Six Flags CAPS Rating: **