Thursday'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 Thursday:

Company

Closing Price

CAPS Rating

(5 max)

%

Change

52-Week

Range

ExpressJet Holdings (NYSE: XJT  )

$1.61

**

(41.03%)

$1.46-$6.45

Dick's Sporting Goods (NYSE: DKS  )

$22.25

***

(16.16%)

$21.03-$36.78

Spectrum Brands (NYSE: SPC  )

$4.23

*

(10.38%)

$3.21-$8.60

Talbots (NYSE: TLB  )

$7.08

*

(10.15%)

$6.48-$26.10

Jackson Hewitt Tax Service (NYSE: JTX  )

$13.43

***

(9.81%)

$10.90-$34.48

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, sadly, 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 105,000-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 Dick's Sporting Goods, which yesterday fell to a new 52-week low after reporting lousy first-quarter earnings.

Net income fell 4% during Q1 thanks in part to a 4% decline in consolidated same-store sales. Gross margin, meanwhile, fell by 120 basis points, diluting the impact of a better-than-10% improvement in total revenue.

CEO Ed Stack told analysts during a conference call that Dick's customers are feeling the pinch from "gas and food prices." The company reduced its full-year guidance as a result.

Few Fools were surprised. CAPS All-Star euphoria96 put it this way in February:

Great store, still small and growing. However, we're heading into a huge recession that has not been priced into [Dick's Sporting Goods] yet. If you like [this company] wait 18 months and buy at much lower prices. Growth companies get hit very hard in market downturns.

Worser
Next up is Spectrum Brands, a former guest in this column that sank on news that fellow "Worst" alumnus Moody's (NYSE: MCO  ) may be threatening to downgrade its debt.

But is the situation at Spectrum really that bad? Yep. Executives recently agreed to sell its pet products division to Salton for $692.5 million in cash, which it needs -- desperately -- to pay down some of its reported $2.6 billion in long-term debt.

And I do mean "desperately." Check out how Spectrum's liquidity has deteriorated in recent years:

Metrics

TTM*

FY 2007

FY 2006

FY 2005

Debt-to-total capital

(lower is better)

109.7%

104.4%

83.4%

73.2%

EBIT** / interest expense

(higher is better)

1.0

0.9

1.2

1.9

Source: Capital IQ, a division of Standard & Poor's.
Spectrum's fiscal year ends on Sept. 30 of the named year.
*Trailing 12 months. **EBIT = earnings before interest and tax.

Worst
But our winner is ExpressJet Holdings, which announced a plan to cut capacity by 30% because of soaring fuel prices and "excess capacity," which is airline-speak for "too many empty airplanes."

But you knew that. For months, ExpressJet has been unable to keep pace with former legacy patron Continental (NYSE: CAL  ) in terms of load factor. Fixing the problem would require (a) finding a new legacy partner or (b) cutting capacity and thereby reducing fuel expense. Not much of a choice, is it?

ExpressJet and its hurry-up-and-cut-flights-before-we-go-out-of-business business model ... Thursday'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 in a week with more stock horror stories.

Fool.com contributor Tim Beyers, who is ranked 15,160 out of more than 105,000 participants in CAPS, also writes for Rule Breakers. He hopes that Keith Olbermann doesn't mind the blatant theft of his "Worst Person in the World" segment from Countdown. Remember, Keith, imitation is the sincerest form of flattery.

Jackson Hewitt is a recommendation of both the Inside Value and Motley Fool Hidden Gems Pay Dirt services. Moody's is a pick of the Inside Value and Stock Advisor services. Try any of the Fool's newsletters free for 30 days. There's no obligation to subscribe.

Tim didn't own shares of any of the stocks mentioned in this article at the time of publication. The Motley Fool's disclosure policy thinks that cooked spinach is the worst veggie in the world.


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